In 1978, Mario's granddaughter, Miuccia Prada, took over the company. Miuccia was a former mime who had spent five years studying at Milan's Teatro Piccolo, and had a PhD in political science. Although her qualifications didn't seem appropriate, her sense of fashion was spot on. The label was still mainly a leather goods manufacturer at that point, and had been struggling financially for several years. Sales were about $400,000 a year when Prada inherited the company in 1978. Competition from other fashion houses like Gucci had taken its toll. Miuccia turned things around and steered the House of Prada towards the world of haute couture.

About the same time as she took the helm of the Prada label, Miuccia married Patrizio Bertelli. Bertelli took on the role of business manager, allowing Miuccia to focus on designing and perfecting the new Prada look. Miuccia had been making black waterproof backpacks since 1970, out of a nylon fabric called "Pocone". She unveiled the classic Prada handbag which was simple, sleek, black nylon, and in 1985 it became an overnight sensation.

The bag was functional and sturdy, practical and fashionable. The high price tag that accompanied the handbags caused an onslaught of designer knock-offs, which only helped to make the genuine Prada articles more in demand. In the 1980's, other labels were creating designs that played on sexuality. Frilly, lacy, brightly colored garments that were low cut on top and short on the bottom were popular. Prada hit the runway in 1989 with its pret-a-porter collection, with elegant, simple pieces featuring clean lines, luxurious fabrics, and basic colors. The fashion world took notice, and Prada's popularity skyrocketed.