Critical limb ischemia is an important clinical problem that often leads to disability and limb loss. Vascular endothelial growth factor (VEGF), delivered either as recombinant protein or as gene therapy, has been shown to promote both collateral artery formation (arteriogenesis) and capillary angiogenesis in animal models of hindlimb ischemia. However, none of the previous studies has demonstrated an improvement in tissue hypoxia, the condition that drives the molecular response to ischemia. Furthermore, the optimal vector and route of gene delivery have not been determined. Recently, adeno-associated viral (AAV) vectors, which efficiently transduce skeletal muscle and produce sustained transgene expression, have been used as gene therapy vectors. We asked whether an intra-arterial injection of AAV-VEGF(165) normalizes muscle oxygen tension by increasing skeletal muscle oxygen tension, and promotes arteriogenesis and angiogenesis in a rat model of severe hindlimb ischemia. We found that AAV-VEGF treatment normalized muscle oxygen tension in the ischemic limb. In contrast, vehicle and AAV-lacZ-treated limbs remained ischemic. Collateral arteries were more numerous in AAV-VEGF-treated rats, but, surprisingly, capillaries were not. We conclude that intra-arterial AAV-mediated gene transfer of AAV-VEGF(165) normalizes muscle oxygen tension and leads to arteriogenesis in rats with severe hindlimb ischemia.