Therapeutic gene delivery typically involves the addition of a transgene expression cassette to mutant cells. This approach is complicated by transgene silencing, aberrant transcriptional regulation and insertional mutagenesis. An alternative strategy is to correct mutations through homologous recombination, allowing for normal regulation of gene expression from the endogenous locus. Adeno-associated virus (AAV) vectors containing single-stranded DNA efficiently transduce cells in vivo and have been shown to target homologous chromosomal sequences in cultured cells. To determine whether AAV-mediated gene targeting can occur in vivo, we developed a mouse model that contains a mutant, nuclear-localized lacZ gene inserted at the ubiquitously expressed ROSA26 locus. Foci of beta-galactosidase-positive hepatocytes were observed in these mice after injection with an AAV vector containing a lacZ gene fragment, and precise correction of the 4-bp deletion was demonstrated by gene sequencing. We also used AAV gene-targeting vectors to correct the naturally occurring GusB gene mutation responsible for murine mucopolysaccharidosis type VII.