Postmitotic neurons have high levels of methylated cytosine and its oxidized intermediates such as 5-hydroxymethylcytosine. However, the functional relevance of these epigenetic modifications of DNA are poorly understood. Here we show that some cytidine analogues, such as cytarabine, cause DNA double-strand breaks during TET-mediated active 5-methylcytosine demethylation by interrupting TDG-dependent base excision repair. These double-strand breaks are frequently converted into deletions and translocations by DNA ligase 4. In vivo, Purkinje and Golgi cells in the cerebellum are the only neuronal populations that exhibit high levels of DNA damage due to cytarabine. In Purkinje cells, TET targets highly expressed gene bodies marked by enhancer-associated histone modifications. Many of these genes control movement coordination, which explains the long-recognized cerebellar neurotoxicity of cytarabine. We show that other cytidine analogues, such as gemcitabine, cause only single-strand breaks in neurons, which are repaired by DNA ligase 3 with minimal toxicity. Our findings uncover a mechanistic link between TET-mediated DNA demethylation, base excision repair and gene expression in neurons. The results also provide a rational explanation for the different neurotoxicity profiles of an important class of antineoplastic agents.