Abstract Background Homologous recombination mediated gene targeting is still too inefficient to be applied extensively in genomics and gene therapy. Although sequence-specific nucleases could greatly stimulate gene targeting efficiency, the off-target cleavage sites of these nucleases highlighted the risk of this strategy. Adeno-associated virus (AAV)-based vectors are used for specific gene knockouts, since several studies indicate that these vectors are able to induce site-specific genome alterations at high frequency. Since each targeted event is accompanied by at least ten random integration events, increasing our knowledge regarding the mechanisms behind these events is necessary in order to understand the potential of AAV-mediated gene targeting for therapy application. Moreover, the role of AAV regulatory proteins (Rep) and inverted terminal repeated sequences (ITRs) in random and homologous integration is not completely known. In this study, we used the yeast Saccharomyces cerevisiae as a genetic model system to evaluate whether the presence of ITRs in the integrating plasmid has an effect on gene targeting and random integration. Results We have shown that the presence of ITRs flanking a gene targeting vector containing homology to its genomic target decreased the frequency of random integration, leading to an increase in the gene targeting/random integration ratio. On the other hand, the expression of Rep proteins, which produce a nick in the ITR, significantly increased non-homologous integration of a DNA fragment sharing no homology to the genome, but had no effect on gene targeting or random integration when the DNA fragment shared homology with the genome. Molecular analysis showed that ITRs are frequently conserved in the random integrants, and that they induce rearrangements. Conclusions Our results indicate that ITRs may be a useful tool for decreasing random integration, and consequently favor homologous gene targeting.