Ten-eleven translocation 1-3 (Tet1-3) proteins have recently been discovered in mammalian cells to be members of a family of DNA hydroxylases that possess enzymatic activity toward the methyl mark on the 5-position of cytosine (5-methylcytosine [5mC]), a well-characterized epigenetic modification that has essential roles in regulating gene expression and maintaining cellular identity. Tet proteins can convert 5mC into 5-hydroxymethylcytosine (5hmC), 5-formylcytosine (5fC), and 5-carboxylcytosine (5caC) through three consecutive oxidation reactions. These modified bases may represent new epigenetic states in genomic DNA or intermediates in the process of DNA demethylation. Emerging biochemical, genetic, and functional evidence suggests that Tet proteins are crucial for diverse biological processes, including zygotic epigenetic reprogramming, pluripotent stem cell differentiation, hematopoiesis, and development of leukemia. Insights into how Tet proteins contribute to dynamic changes in DNA methylation and gene expression will greatly enhance our understanding of epigenetic regulation of normal development and human diseases.