DNA methylation is critical during mammalian development, generally represses transcription when present at gene promoters and regulates cell lineage-specific gene expression programs. Conversely, during cellular reprogramming, efficient erasure of DNA methylation is essential for reactivation of previously silenced genes and for attaining pluripotency. The identity of such “DNA demethylase(s)” has been elusive until our recent discovery of the Tet family of dioxygenases. As a research fellow in Anjana Rao’s group, I first reported that TET proteins convert 5-methylcytosine to 5-hydroxymethylcytosine in DNA, a novel epigenetic modification that can facilitate DNA demethylation and is associated with pluripotency. I further demonstrated that Tet1 and Tet2 are highly expressed in mouse embryonic stem cells (ESCs) and regulate cell fate specification. ESCs depleted of Tet1 by RNAi show diminished expression of the Nodal antagonist Lefty1, resulting in hyperactive Nodal signaling and skewed differentiation toward definitive endoderm in vitro. In Fgf4- and heparin-supplemented culture, Tet1-depleted ESCs activate the trophoblast stem cell determinant Elf5 and can colonize the placenta in midgestation embryo chimeras. Consistent with these findings, Tet1-depleted ESCs form aggressive hemorrhagic teratomas with increased endoderm and ectopic appearance of trophoblastic giant cells. This proposal aims to address (1) the detailed mechanisms by which Tet proteins regulate the transition between ESC self-renewal and differentiation into distinct lineages; (2) how Tet1 regulates development of the early mouse embryo and (3) how Tet expression affects the differentiation potential of induced pluripotent stem cells (iPSCs). Insights from these studies will open new avenues to improve derivation of specific cell lineages from ESCs and iPSCs by modulating Tet expression and/or activities, with potential applications in disease modeling and cellular replacement therapies.