The pathogenic aggregation of misfolded prion protein (PrP) in axons underlies prion disease pathologies. The molecular mechanisms driving axonal misfolded PrP aggregate formation leading to neurotoxicity are unknown. We found that the small endolysosomal guanosine triphosphatase (GTPase) Arl8b recruits kinesin-1 and Vps41 (HOPS) onto endosomes carrying misfolded mutant PrP to promote their axonal entry and homotypic fusion toward aggregation inside enlarged endomembranes that we call endoggresomes. This axonal rapid endosomal sorting and transport-dependent aggregation (ARESTA) mechanism forms pathologic PrP endoggresomes that impair calcium dynamics and reduce neuronal viability. Inhibiting ARESTA diminishes endoggresome formation, rescues calcium influx, and prevents neuronal death. Our results identify ARESTA as a key pathway for the regulation of endoggresome formation and a new actionable antiaggregation target to ameliorate neuronal dysfunction in the prionopathies.