Somatic cells can be reprogrammed into induced pluripotent stem cells (iPSCs) by using the pluripotency factors Oct4, Sox2, Klf4 and c-Myc (together referred to as OSKM). iPSC reprogramming erases somatic epigenetic signatures—as typified by DNA methylation or histone modification at silent pluripotency loci—and establishes alternative epigenetic marks of embryonic stem cells (ESCs). Here we describe an early and essential stage of somatic cell reprogramming, preceding the induction of transcription at endogenous pluripotency loci such as Nanog and Esrrb. By day 4 after transduction with OSKM, two epigenetic modification factors necessary for iPSC generation, namely poly(ADP-ribose) polymerase-1 (Parp1) and ten-eleven translocation-2 (Tet2), are recruited to the Nanog and Esrrb loci. These epigenetic modification factors seem to have complementary roles in the establishment of early epigenetic marks during somatic cell reprogramming: Parp1 functions in the regulation of 5-methylcytosine (5mC) modification, whereas Tet2 is essential for the early generation of 5-hydroxymethylcytosine (5hmC) by the oxidation of 5mC (refs 3,4). Although 5hmC has been proposed to serve primarily as an intermediate in 5mC demethylation to cytosine in certain contexts, our data, and also studies of Tet2-mutant human tumour cells, argue in favour of a role for 5hmC as an epigenetic mark distinct from 5mC. Consistent with this, Parp1 and Tet2 are each needed for the early establishment of histone modifications that typify an activated chromatin state at pluripotency loci, whereas Parp1 induction further promotes accessibility to the Oct4 reprogramming factor. These findings suggest that Parp1 and Tet2 contribute to an epigenetic program that directs subsequent transcriptional induction at pluripotency loci during somatic cell reprogramming.