Even though the TET enzymes catalyze the generation of 5-hydroxymethyl-cytosines required for lineage commitment and subsequent differentiation of stem cells into erythroid cells, the mechanisms that link extra-cellular signals to TET activation and DNA hydroxymethylation are unknown. We demonstrate that hematopoietic cytokines phosphorylate TET2 leading to its activation in erythroid progenitors. Specifically, cytokine receptor associated, JAK2, phosphorylates TET2 at tyrosines 1939 and 1964. Phosphorylated TET2 interacts with erythroid transcription factor, KLF1, and this interaction with TET2 is increased upon exposure to erythropoietin. The activating JAK2V617F mutation seen in myeloproliferative disease patient samples and in mouse models is associated with increased TET activity and cytosine hydroxymethylation as well as genome wide loss of cytosine methylation. These epigenetic and functional changes are also associated with increased expression of several oncogenic transcripts. Thus, we demonstrate that JAK2 mediated TET2 phosphorylation provides a mechanistic link between extracellular signals and epigenetic changes during hematopoiesis.