Diversification of the avian primary immunoglobulin (Ig) repertoire is achieved in developing B cells by somatic hypermutation (SHM) and gene conversion (GCV). GCV is a type of homologous recombination that unidirectionally transfers segments of Ig pseudogenes to Ig variable domains. It is regulated by epigenetic mechanisms like histone modifications, but the role of DNA methylation remains unclear. Here, we demonstrate that the chicken B‐cell line DT40 lacking TET3, a member of the TET (Ten‐eleven translocation) family dioxygenases that facilitate DNA demethylation, exhibited a marked reduction in GCV activity in Ig variable regions. This was accompanied by a drop in the bulk levels of 5‐hydroxymethylcytosine, an oxidized derivative of 5‐methylcytosine, whereas TET1‐deficient or TET2‐deficient DT40 strains did not exhibit such effects. Deletion of TET3 caused little effects on the expression of proteins required for SHM and GCV, but induced hypermethylation in some Ig pseudogene templates. Notably, the enhanced methylation occurred preferably on non‐CpG cytosines. Disruption of both TET1 and TET3 significantly inhibited the expression of activation‐induced cytidine deaminase (AID), an essential player in Ig diversification. These results uncover unique roles of TET proteins in avian Ig diversification, highlighting the potential importance of TET3 in maintaining hypomethylation In Ig pseudogenes.