TET2 is a close relative of TET1, an enzyme that converts 5-methylcytosine (5mC) to 5-hydroxymethylcytosine (5hmC) in DNA. The gene encoding TET2 resides at chromosome 4q24, in a region showing recurrent microdeletions and copy-neutral loss of heterozygosity (CN-LOH) in patients with diverse myeloid malignancies. Somatic TET2 mutations are frequently observed in myelodysplastic syndromes (MDS), myeloproliferative neoplasms (MPN), MDS/MPN overlap syndromes including chronic myelomonocytic leukaemia (CMML), acute myeloid leukaemias (AML) and secondary AML (sAML). We show here that TET2 mutations associated with myeloid malignancies compromise catalytic activity. Bone marrow samples from patients with TET2 mutations displayed uniformly low levels of 5hmC in genomic DNA compared to bone marrow samples from healthy controls. Moreover, small hairpin RNA (shRNA)-mediated depletion of Tet2 in mouse haematopoietic precursors skewed their differentiation towards monocyte/macrophage lineages in culture. There was no significant difference in DNA methylation between bone marrow samples from patients with high 5hmC versus healthy controls, but samples from patients with low 5hmC showed hypomethylation relative to controls at the majority of differentially methylated CpG sites. Our results demonstrate that Tet2 is important for normal myelopoiesis, and suggest that disruption of TET2 enzymatic activity favours myeloid tumorigenesis. Measurement of 5hmC levels in myeloid malignancies may prove valuable as a diagnostic and prognostic tool, to tailor therapies and assess responses to anticancer drugs.