It was recently shown that a large portion of the human transcriptome can originate from within repetitive elements, leading to ectopic expression of protein-coding genes. However the mechanism of transcriptional activation of repetitive elements has not been definitively elucidated. For the first time, we directly demonstrate that hypomethylation of retrotransposons can cause altered gene expression in humans. We also reveal that active LINE-1s switch from a tetranucleosome to dinucleosome structure, acquiring H2A.Z- and nucleosome-free regions upstream of TSSs, previously shown only at active single-copy genes. Hypomethylation of a specific LINE-1 promoter was also found to induce an alternate transcript of the MET oncogene in bladder tumors and across the entire urothelium of tumor-bearing bladders. These data show that, in addition to contributing to chromosomal instability, hypomethylation of LINE-1s can alter the functional transcriptome and plays a role not only in human disease but also in disease predisposition.