α-secretase-mediated cleavage of amyloid precursor protein (APP) precludes formation of neurotoxic amyloid-β (Aβ) peptides, and α-cleavage of cellular prion protein (PrP C) prevents its conversion into misfolded, pathogenic prions (PrP Sc). The mechanisms leading to decreased α-secretase activity in Alzheimer's and prion disease remain unclear. Here, we find that tumor necrosis factor-α-converting enzyme (TACE)-mediated α-secretase activity is impaired at the surface of neurons infected with PrP Sc or isolated from APP-transgenic mice with amyloid pathology. 3-phosphoinositide-dependent kinase-1 (PDK1) activity is increased in neurons infected with prions or affected by Aβ deposition and in the brains of individuals with Alzheimer's disease. PDK1 induces phosphorylation and caveolin-1-mediated internalization of TACE. This dysregulation of TACE increases PrP Sc and Aβ accumulation and reduces shedding of TNF-α receptor type 1 (TNFR1). Inhibition of PDK1 promotes localization of TACE to the plasma membrane, restores TACE-dependent α-secretase activity and cleavage of APP, PrP C and TNFR1, and attenuates PrP Sc - and Aβ-induced neurotoxicity. In mice, inhibition or siRNA-mediated silencing of PDK1 extends survival and reduces motor impairment following PrP Sc infection and in APP-transgenic mice reduces Alzheimer's disease-like pathology and memory impairment.