A novel pathway of adeno-associated virus (AAV) replication marked by the assembly of circular monomer duplex intermediates (cAAV) has been recently discovered. In the present report we identify a single AD domain of the inverted terminal repeat as a minimal origin of cAAV replication. A small internal palindrome (BB), necessary for optimal Rep-inverted terminal repeat interaction, does not contribute to the efficiency of cAAV replication, while the terminal resolution site is an essential cis-acting element. Furthermore, recombinant cAAV vectors that encompass only the AD domain replicate exclusively in a circular form and no detectable linear duplex replicative intermediates are generated, suggesting that both pathways of AAV replication are independent and can be separated. In addition, we show that cAAVs are efficient templates for encapsidation of single-stranded DNA genomes, an observation that assigns a biological role for these novel replication species. Together, these findings shed new light on the current model of AAV replication and packaging.Adeno-associated virus type 2 (AAV) is a parvovirus nonpathogenic to humans with a genome of approximately 4.7 kb (39). The AAV genome consists of two open reading frames that encode regulatory (Rep) and structural capsid (Cap) proteins flanked by 145-bp inverted terminal repeats (ITR) (39). These ITRs are the only cis-acting elements necessary for virus replication and encapsidation. Recombinant AAVs (rAAV) that do not contain any endogenous coding regions efficiently propagate when Rep and Cap are provided in trans (2, 3). In nature, a secondary infection with helper virus, e.g., adenovirus, is necessary to trigger a productive infection. AAV genomes then undergo replication followed by assembly of infectious virions containing single-stranded DNA (ssDNA) of either positive or negative polarity (2, 4). Adenovirus genes implicated in AAV replication have been identified and include E1A, E1B, E4orf6, E2A, and VA RNA (7,20,21,31,32). Similar to provirus in latently infected cells, AAV genomes can be efficiently rescued from a recombinant cis plasmid following transient transfection into human cells (33-35). The necessary helper functions can be delivered either by adenovirus infection or by transfecting a plasmid encoding a minimal set of adenovirus helper genes (10, 16).Events of AAV lytic infection are described by a commonly accepted self-priming strand displacement model (1). The first 125 nucleotides of AAV termini include elements capable of forming a T-shaped duplex structure (AЈ-BЈ-B-CЈ-C-A) and are followed by a unique 20-bp D-sequence (3, 45). The Rep gene encodes four proteins that are synthesized from the same open reading frame via the use of alternate promoters and splicing (2, 39). Two of these proteins (Rep78 and Rep68) possess site-specific and strand-specific endonuclease activity.They bind to the Rep-binding site (Rbs) mapped to the tetrameric GAGC repeat of the A stem of the ITR and cleave it at the terminal resolution site (trs), positioned b...