Prion diseases are associated with accumulation of the amyloid form of the prion protein, but the mechanisms of toxicity are unknown. Amyloid toxicity is also associated with fungal prions. In Podospora anserina, the simultaneous presence of [Het-s] prion and its allelic protein HET-S causes cell death in a self-/nonself-discrimination process. Here, using the prion form of a fragment of HET-s ([PrD(157)(+)]), we show that [Het-s]-HET-S toxicity can be faithfully recapitulated in yeast. Overexpression of Hsp40 chaperone, Sis1, rescues this toxicity by curing cells of [PrD(157)(+)]. We find no evidence for toxic [PrD(157)(+)] conformers in the presence of HET-S. Instead, [PrD(157)(+)] appears to seed HET-S to accumulate at the cell periphery and to form aggregates distinct from visible [PrD(157)(+)] aggregates. Furthermore, HET-S mutants that cause HET-S to be sequestered into [PrD(157)(+)] prion aggregates are not toxic. The localization of HET-S at the cell periphery and its association with cell death was also observed in the native host Podospora anserina. Thus, upon interaction with [Het-s], HET-S localizes to the cell periphery, and this relocalization, rather than the formation of mixed HET-s/HET-S aggregates, is associated with toxicity.