Adeno-associated virus (AAV) is a potential vector for in vivo gene therapy. A critical analysis of its utility has been hampered by methods of production that are inefficient, difficult to scale up, and that often generate substantial quantities of replication-competent AAV. We describe a novel method for producing AAV that addresses these problems. A cell line, called B50, was created by stably transfecting into HeLa cells a rep/cap-containing plasmid utilizing endogenous AAV promoters. Production of AAV occurs in a two-step process. B50 is infected with an adenovirus defective in E2b, to induce Rep and Cap expression and provide helper functions, followed by a hybrid virus in which the AAV vector is cloned in the E1 region of a replication-defective adenovirus. This results in a 100-fold amplification and rescue of the AAV genome, leading to a high yield of recombinant AAV that is free of replication-competent AAV. Intramuscular injection of vector encoding erythropoietin into skeletal muscle of mice resulted in supraphysiologic levels of hormone in serum that was sustained and caused polycythemia. This method of AAV production should be useful in scaling up for studies in large animals, including humans.