Many genetic and acquired liver disorders are amenable to gene and/or cell therapy. However, the efficiencies of cell engraftment and stable genetic modification are low and often subtherapeutic. In particular, targeted gene modifications from homologous recombination are rare events. These obstacles could be overcome if hepatocytes that have undergone genetic modification were to be selectively amplified or expanded. We describe a universally applicable system for in vivo selection and expansion of gene-modified hepatocytes in any genetic background. In this system, the therapeutic transgene is coexpressed with a short hairpin RNA (shRNA) that confers modified hepatocytes with resistance to drug-induced toxicity. An shRNA against the tyrosine catabolic enzyme 4-OH-phenylpyruvate dioxygenase protected hepatocytes from 4-[(2-carboxyethyl)-hydroxyphosphinyl]-3-oxobutyrate, a small-molecule inhibitor of fumarylacetoacetate hydrolase. To select for specific gene targeting events, the protective shRNA was embedded in a microRNA and inserted into a recombinant adeno-associated viral vector designed to integrate site-specifically into the highly active albumin locus. After selection of the gene-targeted cells, transgene expression increased 10- to 1000-fold, reaching supraphysiological levels of human factor 9 protein (50,000 ng/ml) in mice. This drug resistance system can be used to achieve therapeutically relevant transgene levels in hepatocytes in any setting.