TET2 is a methylcytosine dioxygenase that is frequently mutated in myeloid malignancies, notably myelodysplasia and acute myeloid leukemia. TET2 catalyses the conversion of 5'-methylcytosine to 5'-hydroxymethylcytosine within DNA and has been implicated in the process of genomic demethylation. However, the mechanism by which TET2 loss of function results in hematopoietic dysplasia and leukemogenesis is poorly understood. Here, we show that TET2 is expressed in undifferentiated embryonic stem cells and that its knockdown results in reduction of 5'-hydroxymethylcytosine in genomic DNA. We also present DNA methylation data from bone marrow samples obtained from patients with TET2-mutated myelodysplasia. Based on these findings, we sought to identify the role of TET2 in regulating pluripotency and differentiation. We show that overexpression of TET2 in a stably integrated transgene leads to increased alkaline phosphatase expression in differentiating ES cells and impaired differentiation in methylcellulose culture. We speculate that this effect is due to TET2-mediated expression of stem cell genes in ES cells via hydroxylation of 5'-methylcytosines at key promoter sequences within genomic DNA. This leads to relative hypomethylation of gene promoters as 5'-hydroxymethylcytosine is not a substrate for DNMT1-mediated maintenance methylation. We sought to test this hypothesis by cotransfecting the TET2 gene with methylated reporter genes. The results of these experiments are presented.