One of the biggest challenges in optimizing viral vectors for gene therapy relates to the immune response of the host. Adeno-associated virus (AAV) vectors are associated with low immunogenicity and toxicity, resulting in vector persistence and long-term transgene expression. The inability of AAV vectors to efficiently transduce or activate antigen presenting cells (APCs) may account for their decreased immunogenicity. AAV mediated gene therapy however, leads to the development of antibodies against the vector capsid. Anti-AAV antibodies have neutralizing effects that decrease the efficiency of in vivo gene therapy and can prevent vector re-administration. Furthermore, recent studies have shown that AAV vectors can elicit both cellular and humoral immune responses against the transgene product. Both cell-mediated response and humoral response to the delivered gene depend on a number of variables; including the nature of the transgene, the promoter used, the route and site of administration, vector dose and host factors. The response of the host to the vector, in terms of antigen-specific immunity, will play a substantial role in clinical outcome. It is therefore important to understand both, why AAV vectors are able to escape immunity and the circumstances and mechanisms that lead to the induction of immune responses. This review will summarize innate and adaptive immune responses to AAV vectors, discuss possible mechanisms and outline strategies, such as capsid modifications, use of alternative serotypes, or immunosuppression, which have been used to circumvent them.