The Ten-Eleven-Translocation 2 (TET2) gene encodes a member of TET family enzymes that alters the epigenetic status of DNA by oxidizing 5-methylcytosine to 5-hydroxymethylcytosine (5hmC). Somatic loss-of-function mutations of TET2 are frequently observed in patients with diverse myeloid malignancies, including myelodysplastic syndromes, myeloproliferative neoplasms, and chronic myelomonocytic leukemia. By analyzing mice with targeted disruption of the Tet2 catalytic domain, we show here that Tet2 is a critical regulator of self-renewal and differentiation of hematopoietic stem cells (HSCs). Tet2 deficiency led to decreased genomic levels of 5hmC and augmented the size of the hematopoietic stem/progenitor cell pool in a cell-autonomous manner. In competitive transplantation assays, Tet2-deficient HSCs were capable of multilineage reconstitution and possessed a competitive advantage over wild-type HSCs, resulting in enhanced hematopoiesis into both lymphoid and myeloid lineages. In vitro, Tet2 deficiency delayed HSC differentiation and skewed development toward the monocyte/macrophage lineage. Our data indicate that Tet2 has a critical role in regulating the expansion and function of HSCs, presumably by controlling 5hmC levels at genes important for the self-renewal, proliferation, and differentiation of HSCs.