Treatment of genetic disease by protein or gene replacement therapy is hampered by immune responses to the therapeutic protein. An excellent example is formation of inhibitory antibodies to coagulation factors in treatment of the X-linked bleeding disorder hemophilia. Experiments in murine and canine models of hemophilia B (deficiency in factor IX) have demonstrated sustained therapeutic levels of factor IX transgene expression following hepatic adeno-associated viral gene transfer in animals with deletion and nonsense mutations in the factor IX gene. This article reviews experimental evidence for induction of immune tolerance to the factor IX transgene product by hepatic adeno-associated viral gene transfer, which has been shown to limit T helper cell responses and to substantially reduce the risk of antibody responses. Tolerance induction is associated with activation of regulatory CD4(+) T cells capable of suppressing antibody formation to factor IX protein. Hepatic administration of adeno-associated viral vector expressing ovalbumin in mice transgenic for a T cell receptor specific for this antigen provided direct evidence for induction of CD4(+) T cell tolerance, including T cell anergy and clonal deletion. Taken together, these data indicate the potential for viral in vivo gene transfer not only to provide sustained systemic expression, but moreover to induce immunological hypo-responsiveness to the therapeutic gene product.