An endoproteolytic cleavage termed α-cleavage between residues 111/112 is a characteristic feature of the cellular prion protein (PrP(C)). This cleavage generates a soluble N-terminal fragment (PrPN1) and a glycosylphosphatidylinositol-anchored C-terminal fragment (PrPC1). Independent studies demonstrate that modulating PrP(C) α-cleavage represents a potential therapeutic strategy in prion diseases. The regulation of PrP(C) α-cleavage is unclear. The only known domain that is essential for the α-cleavage to occur is a hydrophobic domain (HD). Importantly, the HD is also essential for the formation of PrP(C) homodimers. To explore the role of PrP(C) homodimerization on the α-cleavage, we used a well described inducible dimerization strategy whereby a chimeric PrP(C) composed of a modified FK506-binding protein (Fv) fused with PrP(C) and termed Fv-PrP is incubated in the presence of a dimerizer AP20187 ligand. We show that homodimerization leads to a considerable increase of PrP(C) α-cleavage in cultured cells and release of PrPN1 and PrPC1. Interestingly, enforced homodimerization increased PrP(C) levels at the plasma membrane, and preventing PrP(C) trafficking to the cell surface inhibited dimerization-induced α-cleavage. These observations were confirmed in primary hippocampal neurons from transgenic mice expressing Fv-PrP. The proteases responsible for the α-cleavage are still elusive, and in contrast to initial studies we confirm more recent investigations that neither ADAM10 nor ADAM17 are involved. Importantly, PrPN1 produced after PrP(C) homodimerization protects against toxic amyloid-β (Aβ) oligomers. Thus, our results show that PrP(C) homodimerization is an important regulator of PrP(C) α-cleavage and may represent a potential therapeutic avenue against Aβ toxicity in Alzheimer's disease.