Adeno-associated virus 2 (AAV) vectors are currently in use in Phase I/II clinical trials for gene therapy of cystic fibrosis and hemophilia B. Although 100% of murine hepatocytes can be targeted by AAV vectors, the transgene expression is limited to B5% of hepatocytes. Since the viral genome is a single-stranded DNA, and single strands of both polarities are encapsidated with equal frequency, it has been suggested that failure to undergo DNA strandannealing accounts for the lack of efficient transgene expression. We and others, on the other hand, have proposed that failure to undergo viral second-strand DNA synthesis attributes to the observed low efficiency of transgene expression. We have previously documented that a cellular protein, designated FKBP52, when present in phosphorylated forms, inhibits the viral second-strand DNA synthesis, and consequently, limits transgene expression in nonhepatic cells, whereas unphosphorylated forms of FKBP52 have no effect. To further evaluate whether phosphorylated FKBP52 is also involved in regulating AAV-mediated transgene expression in murine hepatocytes, we generated transgenic mice overexpressing the cellular T-cell protein tyrosine phosphatase (TC-PTP) protein, known to catalyze dephosphorylation of FKBP52, as well as mice deficient in FKBP52. We demonstrate here that dephosphorylation of FKBP52 in TC-PTP transgenic (TC-PTP-TG) mice, and removal of FKBP52 in FKBP52-knockout (FKBP52-KO) mice results in efficient transduction of murine hepatocytes following tail-vein injection of recombinant AAV vectors. We also document efficient viral second-strand DNA synthesis in hepatocytes from both TC-PTP-TG and FKBP52-KO mice. Thus, our data strongly support the contention that the viral second-strand DNA synthesis, rather than DNA strand-annealing, is the ratelimiting step in the efficient transduction of hepatocytes, which should have implications in the optimal use of recombinant AAV vectors in human gene therapy. Gene Therapy (2004) The adeno-associated virus 2 (AAV) genome is a singlestranded DNA, which is transcriptionally inactive. Since single-stranded viral genomes of either polarity are encapsidated with equal frequency, 1 it has been suggested that following infection, DNA strand-annealing renders the viral genomes transcriptionally active. 2,3 Others and we, on the other hand, have suggested that viral second-strand DNA synthesis is the rate-limiting step in AAV-mediated transgene expression. [4][5][6][7][8][9][10][11] We previously observed that following intravenous (i.v.) administration into the tail-vein, AAV vectors selectively target the liver in mice, but less than 5% of hepatocytes express the transgene. 12 These studies were subsequently corroborated by other investigators. [13][14][15][16] However, it is not entirely clear why the remainder of the 95% of hepatocytes do not allow transgene expression despite being AAV DNA positive. 13,[17][18][19] In our previous studies, we have identified that a 52 kDa cellular protein, FKBP52, which binds the immunosupp...