The first inverted terminal repeat (ITR) elements were sequenced over 40 years ago and are the only obligatory sequences required in cis for therapeutic recombinant of adeno-associated virus (rAAV) production. Besides playing roles in replication and packaging AAV genomes, the ITRs and the ITR-proximal regions (IPRs) are known to have enhancer and/or promoter-like activities that vary by their associated AAV serotypes. ITRs also impact transduction through recombination and circularization of the genome into episomes, which persist within the cell and confer prolonged transgene expression. Episomes exist in different conformations, as monomers, dimers, and larger concatemers. However, the exact mechanism for how they are formed have not been extensively explored. We generated vectors with different ITRs at the 5’ and 3’ of the vector genome and with and without IPRs to test their impact on transgene expression and found that IPRs significantly increased transgene expression in the liver. Serendipitously, we were also able to identify the region within the IPR that is affiliated with increased expression, and a region that seems to repress expression. Circularized episomes were also characterized in its entirety for the first time through long-read sequencing. Nanopore and single molecule, real-time sequencing showed that contrary to the current dogma, only a small percentage of episomes contained intact ITRs post-entry and over 50% of the episomes did not retain any ITR sequences. This study has illuminated the potential for ITRs and IPRs in designing gene therapy vectors and has shed light on mechanisms behind episome formation for AAV.