A resequencing approach was adopted to identify sequence variants in the PRNP gene that may affect susceptibility or resistance to bovine spongiform encephalopathy. The entire PRNP gene (>21 kb) was sequenced from 26 chromosomes from a group of Holstein-Friesian cows, as well as exon 3 of PRNP (>4 kb) from a further 24 chromosomes from six diverse breeds. We identified 51 variant sequences of which 42 were single nucleotide polymorphisms and nine were insertion/deletion (indel) events. The study was extended to exon 3 of the sheep PRNP gene where 23 sequence variants were observed, four of which were indels. The level of nucleotide diversity in the complete bovine PRNP gene was pi = 0.00079, which is similar to that found at the bovine T-cell receptor alpha delta joining region (pi = 0.00077), but somewhat less than that observed for the bovine leptin (pi = 0.00265). Sequence variation within exon 3 of PRNP in both cattle (pi = 0.00102) and sheep (pi = 0.00171) was greater than that for the complete PRNP gene, with sheep showing greater sequence variation in exon 3 than cattle. The level of sequence variation reported here is greater than previously thought for the bovine PRNP gene in cattle. This study highlights the contribution that recombination plays in increasing allelic diversity in this species.