Ten-eleven translocation (Tet) enzymes (Tet1/2/3) mediate 5-methylcytosine (5mC) hydroxylation, which can facilitate DNA demethylation and thereby impact gene expression. Studied mostly for how mutant isoforms impact cancer, the normal roles for Tet enzymes during organogenesis are largely unknown. By analyzing compound mutant zebrafish, we discovered a requirement for Tet2/3 activity in the embryonic heart for recruitment of epicardial progenitors, associated with development of the atrial-ventricular canal (AVC). Through a combination of methylation, hydroxymethylation, and transcript profiling, the genes encoding the activin A subunit Inhbaa (in endocardium) and Sox9b (in myocardium) were implicated as demethylation targets of Tet2/3 and critical for organization of AVC-localized extracellular matrix (ECM), facilitating migration of epicardial progenitors onto the developing heart tube. This study elucidates essential DNA demethylation modifications that govern gene expression changes during cardiac development with striking temporal and lineage specificities, highlighting complex interactions in multiple cell populations during development of the vertebrate heart.