Methylation of cytosines in the mammalian genome represents a key epigenetic modification and is dynamically regulated during development. Compelling evidence now suggests that dynamic regulation of DNA methylation is mainly achieved through a cyclic enzymatic cascade comprised of cytosine methylation, iterative oxidation of methyl group by TET dioxygenases, and restoration of unmodified cytosines by either replication-dependent dilution or DNA glycosylase-initiated base excision repair. In this review, we discuss the mechanism and function of DNA demethylation in mammalian genomes, focusing particularly on how developmental modulation of the cytosine-modifying pathway is coupled to active reversal of DNA methylation in diverse biological processes.