Rheumatoid arthritis (RA) is a systemic autoimmune disease affecting 1% of the world’s population, with significant morbidity and mortality. In this study, we investigated a recombinant adeno-associated virus (rAAV) vector for its potential application in RA gene therapy. rAAV encoding Escherichia coliβ-galactosidase was injected into rat joints which had already been induced into acute arthritis after local lipopolysaccharide (LPS) administration, and the efficiency of in vivo transduction was evaluated. We observed a striking correlation between vector transgene expression and disease severity in arthritic joints. The inflammatory reaction peaked at 3 to 7 days after LPS treatment, and, at the same time, 95% of the synoviocytes had high-level transgene expression. Gene expression diminished to the basal level (5%) when the inflammation subsided at 30 days after LPS treatment. More importantly, the diminished transgene expression could be efficiently reactivated by a repeated insult. The transgene expression in normal joints transduced with rAAV remained low for a long period of time (30 days) but could still be induced to high levels (95%) at 3 to 7 days after LPS treatment. This is the first demonstration of disease state-regulated transgene expression. These findings strongly support the feasibility of therapeutic as well as preventative gene transfer approaches for RA with rAAV vectors containing therapeutic genes, which are expected to respond primarily to the disease state of the target tissue.