Cancer genomes are characterized by focal increases in DNA methylation, co-occurring with widespread hypomethylation. Here, we show that TET loss of function results in a similar genomic footprint. Both 5hmC in wild-type (WT) genomes and DNA hypermethylation in TET-deficient genomes are largely confined to the active euchromatic compartment, consistent with the known functions of TET proteins in DNA demethylation and the known distribution of 5hmC at transcribed genes and active enhancers. In contrast, an unexpected DNA hypomethylation noted in multiple TET-deficient genomes is primarily observed in the heterochromatin compartment. In a mouse model of T cell lymphoma driven by TET deficiency (Tet2/3 DKO T cells), genomic analysis of malignant T cells revealed DNA hypomethylation in the heterochromatic genomic compartment, as well as reactivation of repeat elements and enrichment for single-nucleotide alterations, primarily in heterochromatic regions of the genome. Moreover, hematopoietic stem/precursor cells (HSPCs) doubly deficient for Tet2 and Dnmt3a displayed greater losses of DNA methylation than HSPCs singly deficient for Tet2 or Dnmt3a alone, potentially explaining the unexpected synergy between DNMT3A and TET2 mutations in myeloid and lymphoid malignancies. Tet1-deficient cells showed decreased localization of DNMT3A in the heterochromatin compartment compared with WT cells, pointing to a functional interaction between TET and DNMT proteins and providing a potential explanation for the hypomethylation observed in TET-deficient genomes. Our data suggest that TET loss of function may at least partially underlie the characteristic pattern of global hypomethylation coupled to regional hypermethylation observed in diverse cancer genomes, and highlight the potential contribution of heterochromatin hypomethylation to oncogenesis.