DNA methylation is an important epigenetic modification and is frequently altered in cancer. Convert of 5-methylcytosine (5 mC) to 5-hydroxymethylcytosine (5 hmC) by ten-eleven translocation (TET) family enzymes plays important biological functions in embryonic stem cells, development, aging and disease. Recent reports showed that level of 5 hmC was altered in various types of cancers. However, the change of 5 hmC level in hepatocellular carcinoma (HCC) and association with clinical outcome were not well defined. Here, we reported that level of 5 hmC was decreased in HCC tissues, as compared with non-tumor tissues. Clincopathological analysis showed the decreased level of 5 hmC in HCC was associated with tumor size, AFP level and poor overall survival. We also found that the decreased level of 5 hmC in non-tumor tissues was associated with tumor recurrence in the first year after surgical resection. In an animal model with carcinogen DEN-induced HCC, we found that the level of 5 hmC was gradually decreased in the livers during the period of induction. There was further reduction of 5 hmC in tumor tissues when tumors were developed. In contrast, level of 5 mC was increased in HCC tissues and the increased 5 mC level was associated with capsular invasion, vascular thrombosis, tumor recurrence and overall survival. Furthermore, our data showed that expression of TET1, but not TET2 and TET3, was downregulated in HCC. Taken together, our data indicated 5 hmC may be served as a prognostic marker for HCC and the decreased expression of TET1 is likely one of the mechanisms underlying 5 hmC loss in HCC.