If Serbian Private International Law Act (PIL Act) does not contain the conflict-of-law rule for a legal relationship or legal issue with foreign element which falls within its scope, there is a legal gap which should be filled in accordance with art. 2 PIL Act that provides the sources for filling the gaps (analogous application of the conflict-of-law rules of PIL Act, principles of PIL Act, principles of Serbian legal order and principles of private international law). The gaps in PIL Act are to be determined by interpretation of its provisions, where the special consideration should be given to the characterization of legal relationships and legal issues which serves as a tool for choosing the relevant conflict-oflaw rule in the given case and represents the integral part of the process of their interpretation. Where it is in the process of interpretation and characterization determined that legal relationship or legal issue cannot be subsumed under the legal category of any conflict-of-law rule contained in PIL Act, it comes to the conclusion that legal gap exists. However, it could be determined that a legal relationship or legal issue, which can be subsumed under the legal category of one of the conflict-of-law rules contained in PIL Act, does not correspond to ratio legis of that conflict-of-law rule. In such case this legal relationship or legal issue has to be reduced from the scope of application of that conflict-of-law rule, which means there is also a legal gap. In this paper author analyzes the problem of teleological reduction of the conflict-of-law rules contained in PIL Act and explains how the gaps determined by this method of interpretation can be filled in accordance with Art. 2 PIL Act.