The USFDA approved "epigenetic drug", Decitabine, exerts its effect by hypomethylating DNA, demonstrating the pivotal role aberrant genome-wide DNA methylation patterns play in cancer ontology. Using sensitive technologies in a cellular model of Acute Myeloid Leukemia, we demonstrate that while Decitabine reduces the global levels of 5-methylcytosine (5mC), it results in paradoxical increase of 5-hydroxymethylcytosine (5hmC), 5-formylcytosine (5fC) and 5-carboxylcytosine (5caC) levels. Hitherto, the only biological mechanism known to generate 5hmC, 5fC and 5caC, involving oxidation of 5mC by members of Ten-Eleven-Translocation (TET) dioxygenase family, was not observed to undergo any alteration during DAC treatment. Using a multi-compartmental model of DNA methylation, we show that partial selectivity of TET enzymes for hemi-methylated CpG dinucleotides could lead to such alterations in 5hmC content. Furthermore, we investigated the binding of TET1-catalytic domain (CD)-GFP to DNA by Fluorescent Correlation Spectroscopy in live cells and detected the gradual increase of the DNA bound fraction of TET1-CD-GFP after treatment with Decitabine. Our study provides novel insights on the therapeutic activity of DAC in the backdrop of the newly discovered derivatives of 5mC and suggests that 5hmC has the potential to serve as a biomarker for monitoring the clinical success of patients receiving DAC.