Dependent Term Reference Autocomplete
The basic process would be to make the 2nd field an Ajax (AHAH) created field.  Then in this method, set the #autocomplete render element to a URL that uses the first field's value.  Something like:

function simple_ahah_select($form_state) {
if ($form_state['storage']['content']['simple_select_parent']) {
  $element = array(
    '#type' =&gt; 'textfield',
    '#size' =&gt; '60',
   // Define a autocomplete_path depend on the value selected on the parent select field
    '#autocomplete_path' =&gt; 'simple/autocomplete/' . $form_state['storage']['content']['simple_select_parent']
  );
  }
}
return $element;


The Autocomplete URL can probably be a view if you don't want to write code.  But code would be faster.

See this d.o page for some more details