Czech Inn Hostel has a great name and an accommodating staff. Voted one of the Top 12 Hostels Worldwide by the Washington Post (2006), the Czech also has very comfortable beds in a newly-renovated interior that feels more like a hotel. It's not right downtown, but is a ten-minute direct tram ride from the center in lovely tree-lined Vinohrady, which will absolutely pay off in terms of awesome cheap authentic bars and restaurants if you are willing to find them (and believe me, they're not far off). Czech plus, guys!
Ahoj! Czech Inn is located in a somewhat quiet spot on Francouzska (FRAN-SO-SKA) but as Prague is a small city, you're never far from ANYWHERE you'd want to be. The breakfast is filling, the bar is cheap and staffed by friendly, helpful, dreadlock'd women with bright smiles (especially Nikola and Veronika), and the accommodations are clean, modern and extremely comfortable. Highly recommended for any and all travelers.
This is the best hostel I've ever been at. Everything is so modern and nice and the resturant/bar is really great. You have to try the breakfast there. The rooms were roomy and clean and the beds amazing, especially the pillows. The staff is friendly and helpfull, this hostel has everything one could ask for.
Would recommend this hostel to anyone!