Cancer-testis (CT) genes are expressed in various cancers but not in normal tissues other than in cells of the germline. Although DNA demethylation of promoter-proximal CpGs of CT genes is linked to their expression in cancer, the mechanisms leading to demethylation are unknown. To elucidate such mechanisms we chose to study the Caco-2 colorectal cancer cell line during the course of its spontaneous differentiation in vitro, as we found CT genes, in particular PAGE2, -2B and SPANX-B, to be up-regulated during this process. Differentiation of these cells resulted in a mesenchymal-to-epithelial transition (MET) as evidenced by the gain of epithelial markers CDX2, Claudin-4 and E-cadherin, and a concomitant loss of mesenchymal markers Vimentin, Fibronectin-1 and Transgelin. PAGE2 and SPAN-X up-regulation was accompanied by an increase in Ten-eleven translocation-2 (TET2) expression and cytosine 5-hydroxymethylation as well as the disassociation of heterochromatin protein 1 and the polycomb repressive complex 2 protein EZH2 from promoter-proximal regions of these genes. Reversal of differentiation resulted in down-regulation of PAGE2, -2B and SPANX-B, and induction of epithelial-to-mesenchymal transition (EMT) markers, demonstrating the dynamic nature of CT gene regulation in this model.