A subset of cellular DNA hairpins at double-strand breaks is processed by DNA-dependent protein kinase catalytic subunit (DNA-PKcs)- and Artemis-associated endonuclease. DNA hairpin termini of adeno-associated virus (AAV) are processed by DNA repair machinery; however, how and what cellular factors are involved in the process remain elusive. Here, we show that DNA-PKcs and Artemis open AAV inverted terminal repeat (ITR) hairpin loops in a tissue-dependent manner. We investigated recombinant AAV (rAAV) genome metabolism in various tissues of DNA-PKcs- or Artemis-proficient or -deficient mice. In the absence of either factor, ITR hairpin opening was impaired, resulting in accumulation of double-stranded linear rAAV genomes capped with covalently closed hairpins at termini. The 5' end of 3-base hairpin loops of the ITR was the primary target for DNA-PKcs- and Artemis-mediated cleavage. In the muscle, heart, and kidney, DNA-PKcs- and Artemis-dependent hairpin opening constituted a significant pathway, while in the liver, undefined alternative pathways effectively processed hairpins. In addition, our study revealed a Holliday junction resolvase-like activity in the liver that cleaved T-shaped ITR hairpin shoulders by making nicks at diametrically opposed sites. Thus, our approach furthers our understanding of not only rAAV biology but also fundamental DNA repair systems in various tissues of living animals.