Adeno-associated virus (AAV) based vectors have emerged as important tools for gene therapy in humans. The recent successes seen in Phase I/II clinical trials have also highlighted the issues related to the host and vector-related immune response that preclude the universal application of this promising vector system. A fundamental insight into the biological mechanisms by which AAV infects the host cell and a thorough understanding of the immediate and long-lived cellular responses to AAV infection is likely to offer clues and help design better intervention strategies to improve the therapeutic efficiency of AAV vectors. This article reviews the biology of AAV-host cellular interactions and outlines their application in the development of novel and improved AAV vector systems. © 2014 Bentham Science Publishers.