Transmissible spongiform encephalopathies are a class of fatal neurodegenerative diseases linked to the prion protein. The prion protein normally exists in a soluble, globular state (PrP(C)) that appears to participate in copper metabolism in the central nervous system and/or signal transduction. Infection or disease occurs when an alternatively folded form of the prion protein (PrP(Sc)) converts soluble and predominantly alpha-helical PrP(C) into aggregates rich in beta-structure. The structurally disordered N-terminus adopts beta-structure upon conversion to PrP(Sc) at low pH. Chemical chaperones, such as trimethylamine N-oxide (TMAO), can prevent formation of PrP(Sc) in scrapie-infected mouse neuroblastoma cells [Tatzelt, J., et al. (1996) EMBO J. 15, 6363-6373]. To explore the mechanism of TMAO protection of PrP(C) at the atomic level, molecular dynamics simulations were performed under conditions normally leading to conversion (low pH) with and without 1 M TMAO. In PrP(C) simulations at low pH, the helix content drops and the N-terminus is brought into the small native beta-sheet, yielding a PrP(Sc)-like state. Addition of 1 M TMAO leads to a decreased radius of gyration, a greater number of protein-protein hydrogen bonds, and a greater number of tertiary contacts due to the N-terminus forming an Omega-loop and packing against the structured core of the protein, not due to an increase in the level of extended structure as with the PrP(C) to PrP(Sc) simulation. In simulations beginning with the "PrP(Sc)-like" structure (derived from PrP(C) simulated at low pH in pure water) in 1 M TMAO, similar structural reorganization at the N-terminus occurred, disrupting the extended sheet. The mechanism of protection by TMAO appears to be exclusionary in nature, consistent with previous theoretical and experimental studies. The TMAO-induced N-terminal conformational change prevents residues that are important in the conversion of PrP(C) to PrP(Sc) from assuming extended sheet structure at low pH.