Prion diseases, also known as transmissible spongiform encephalopathies, make up a group of fatal neurodegenerative disorders linked with the misfolding and aggregation of the prion protein (PrP). Although it is not yet understood how the misfolding of PrP induces neurodegeneration, it is widely accepted that the formation of misfolded prion protein (termed PrP(Sc)) is both the triggering event in the disease and the main component of the infectious agent responsible for disease transmission. Despite the clear involvement of PrP(Sc) in prion diseases, the exact composition of PrP(Sc) is not yet well-known. Recent studies show that misfolded oligomers of PrP could, however, be responsible for neurotoxicity and/or infectivity in the prion diseases. Hence, understanding the molecular mechanism of formation of the misfolded oligomers of PrP is critical for developing an understanding about the prion diseases and for developing anti-prion therapeutics. This review discusses recent advances in understanding the molecular mechanism of misfolded oligomer formation by PrP and its implications for the development of anti-prion therapeutics.