Cellular prion protein (PrPC) modulates cell adhesion and signaling in the brain. Conversion to its infectious isoform causes neurodegeneration, including Creutzfeldt-Jakob disease in humans. PrPC undergoes rapid plasma membrane turnover and extracellular release via exosomes. However, the intracellular transport of PrPC and its potential impact on prion disease progression is barely understood. Here we identify critical components of PrPC trafficking that also link intracellular and extracellular PrPC turnover. PrPC associates with muskelin, dynein, and KIF5C at transport vesicles. Notably, muskelin coordinates bidirectional PrPC transport and facilitates lysosomal degradation over exosomal PrPC release. Muskelin gene knockout consequently causes PrPC accumulation at the neuronal surface and on secreted exosomes. Moreover, prion disease onset is accelerated following injection of pathogenic prions into muskelin knockout mice. Our data identify an essential checkpoint in PrPC turnover. They propose a novel connection between neuronal intracellular lysosome targeting and extracellular exosome trafficking, relevant to the pathogenesis of neurodegenerative conditions.