Old Town: everything on your doorstep
Staying inside or right on the edge of the Old Town puts the Astronomical Clock, Charles Bridge and most major sights within a ten-minute walk, which is exactly why it's the busiest and most expensive option. The trade-off is real: streets near the main squares carry genuine nightlife noise into the early hours, and you're paying central-square prices for food and drink unless you actively walk a few streets away (see our food guide for where that line sits).
Malá Strana: the quieter baroque option
Across the river below the castle, Malá Strana trades a few extra minutes' walk to the Old Town sights for noticeably quieter streets, grand baroque architecture, and a more residential, embassy-district atmosphere. The hills mean more walking (or the odd tram ride) if you're not used to slopes, and it puts you closer to Prague Castle and Petřín Hill than to the Jewish Quarter or Wenceslas Square.
How to actually decide
If this is a short first visit and you want to fall out of your hotel directly into the sights, Old Town wins on pure convenience. If you'd rather sleep with the window open, prefer a slower, more atmospheric base, and don't mind a slightly longer walk to the Old Town Square, Malá Strana is arguably the more memorable choice. Neither is a wrong answer — they're simply different trips.