Endoproteolysis of the cellular prion protein (PrP(C)) modulates both the normal function of the protein and the pathogenesis of the neurodegenerative prion diseases. PrP(C) undergoes alpha-cleavage to generate the N-terminally truncated fragment C1. Utilizing various constructs of PrP(C) expressed in human neuroblastoma cells we investigated the subcellular compartment where alpha-cleavage occurs. C1 was detected at the cell surface and the generation of C1 occurred in mutants of PrP(C) incapable of Cu2+-mediated endocytosis. A transmembrane-anchored form that is not lipid raft-localised, as well as a secreted construct lacking the glycosyl-phosphatidylinositol membrane anchor, were also subject to alpha-cleavage. However, when this transmembrane-anchored form was modified with an endoplasmic reticulum retention motif, C1 was not formed. Inhibition of protein export from the Golgi by temperature block increased the amount of C1. Our data thus demonstrate that the alpha-cleavage of PrP(C) occurs predominantly in a raft-independent manner in a late compartment of the secretory pathway.