5-methylcytosine (5-mC) and 5-hydroxymethylcytosine (5-hmC) play a critical role in development and normal physiology. Alterations in 5-mC and 5-hmC patterns are common events in hematopoietic neoplasms. In this review, we begin by emphasizing the importance of 5-mC, 5-hmC, and their enzymatic modifiers in hematological malignancies. Then, we discuss the functions of 5-mC and 5-hmC at distinct genic contexts, including promoter regions, gene bodies, intron-exon boundaries, alternative promoters, and intragenic microRNAs. Recent advances in technology have allowed for the study of 5-mC and 5-hmC independently and specifically permitting distinction between the bases that show them to have transcriptional effects that vary by their location relative to gene structure. We extend these observations to their functions at enhancers and transcription factor binding sites. We discuss dietary influences on 5-mC and 5-hmC levels and summarize the literature on the effects of folate and vitamin C on 5-mC and 5-hmC, respectively. Finally, we discuss how these new themes in the functions of 5-mC and 5-hmC will likely influence the broader research field of epigenetics.