Adeno-associated virus (AAV) replication is dependent on two copies of a 145-bp inverted terminal repeat (ITR) that flank the AAV genome. This is the primary cis-acting element required for productive infection and the generation of recombinant AAV (rAAV) vectors. We have engineered a plasmid (pDD-2) containing only 165 bp of AAV sequence: two copies of the D element, a unique sequence adjacent to the AAV nicking site, flanking a single ITR. When assayed in vivo, this modified hairpin was sufficient for the replication of the plasmid vector when Rep and adenovirus (Ad) helper functions were supplied in trans. pDD-2 replication intermediates were characteristic of the AAV replication scheme in which linear monomer, dimer, and other higher-molecular-weight replicative intermediates are generated. Compared to infectious AAV clones for replication, the modified hairpin vector replicated more efficiently independent of size. Further analysis demonstrated conversion of the input circular plasmid to a linear substrate with AAV terminal repeat elements at either end as an initial step for replication. This conversion was independent of both Rep and Ad helper genes, suggesting the role of host factors in the production of these molecules. The generation of these substrates suggested resolution of the modified terminal repeat through a Holliday-like structure rather than replication as a mechanism for rescue. Production of replicative intermediates via this plasmid substrate were competent not only for AAV DNA replication but also for encapsidation, infection, integration, and subsequent rescue from the chromosome when superinfected with Ad and wild-type AAV. These studies demonstrate that this novel 165-bp ITR substrate is sufficient in cis for the AAV life cycle and should provide a valuable reagent for further dissecting the cis sequences involved in AAV replication, packaging, and integration. In addition, this novel plasmid vector can be used as a substrate for both rAAV vector production and synthetic plasmid vector delivery.