It is well established that misfolded forms of cellular prion protein (PrP [PrP(C)]) are crucial in the genesis and progression of transmissible spongiform encephalitis, whereas the function of native PrP(C) remains incompletely understood. To determine the physiological role of PrP(C), we examine the neurophysiological properties of hippocampal neurons isolated from PrP-null mice. We show that PrP-null mouse neurons exhibit enhanced and drastically prolonged N-methyl-d-aspartate (NMDA)-evoked currents as a result of a functional upregulation of NMDA receptors (NMDARs) containing NR2D subunits. These effects are phenocopied by RNA interference and are rescued upon the overexpression of exogenous PrP(C). The enhanced NMDAR activity results in an increase in neuronal excitability as well as enhanced glutamate excitotoxicity both in vitro and in vivo. Thus, native PrP(C) mediates an important neuroprotective role by virtue of its ability to inhibit NR2D subunits.