Yeast prions are superb models for understanding the mechanisms of self-perpetuating protein aggregates formation. [PSI+] stands among the most documented yeast prions and results from self-assembly of the translation termination factor Sup35p into protein fibrils. A plethora of cellular factors were shown to affect [PSI+] formation and propagation. Clearance of Sup35p prion particles is however poorly understood and documented. Here, we investigated the role of the proteasome in the degradation of Sup35p and in [PSI+] prion propagation. We found that cells lacking the RPN4 gene, which have reduced intracellular proteasome pools, accumulated Sup35p and have defects in [PSI+] formation and propagation. Sup35p is degraded in vitro by the 26S and 20S proteasomes in a ubiquitin-independent manner, generating an array of amyloidogenic peptides derived from its prion-domain. We also demonstrate the formation of a proteasome-resistant fragment spanning residues 83–685 which is devoid of the prion-domain that is essential for [PSI+] propagation. Most important was the finding that the 26S and 20S proteasomes degrade Sup35p fibrils in vitro and abolish their infectivity. Our results point to an overlooked role of the proteasome in clearing toxic protein aggregates, and have important implications for a better understanding of the life cycle of infectious protein assemblies.