Adeno-associated virus (AAV) vectors were shown capable of high efficiency transduction of both dividing and nondividing cells and tissues. AAV-mediated transduction leads to stable, long-term transgene expression in the absence of apparent immune response. These properties and the broad host range of AAV vectors indicate that they constitute a powerful tool for gene therapy purposes. An additional potential benefit of AAV vectors is their ability to integrate site-specifically in the presence of Rep proteins which can be expressed transiently, thus limiting their suspected adverse effects. The major restrictions of AAV as vectors are their limited genetic capacity and strict packaging size constraint of less than 5 kb. Another difficulty is the labor-intensive and expensive procedure for the production and packaging of recombinant AAV vectors. The major benefits and drawbacks of AAV vectors and advances made in the past 3 years are discussed.