Background: Exosomes are a novel mechanism of intercellular transmission of infectious prions. Results: Chemical and RNAi inhibition of the neutral sphingomyelinase (nSMase) pathway impairs exosome formation and prion packaging. Conclusion: The nSMase pathway regulates exosome formation and packaging of infectious prions. Significance: This reveals a novel role for the nSMase pathway in exosomal prion packaging and identifies a direct pathway, which mediates prion transmission.