The TET enzymes oxidize 5-methylcytosine to 5-hydroxymethylcytosine, which can lead to DNA demethylation. However, direct connections between TET-mediated DNA demethylation and transcriptional output are difficult to establish due to challenges of distinguishing global versus locus-specific effects. Here we show that TET1/2/3 triple knockout (TKO) human embryonic stem cells (hESCs) exhibit prominent bivalent promoter hypermethylation without overall corresponding gene expression decrease in the undifferentiated state. Focusing on the bivalent PAX6 locus, we find increased DNMT3B binding is associated with promoter hypermethylation, which precipitates a neural differentiation defect and failure of PAX6 induction during differentiation. dCas9-mediated locus-specific demethylation and global inactivation of DNMT3B in TKO hESCs partially reverses the hypermethylation at the PAX6 promoter and improves differentiation to neuroectoderm. Taken together with further genome-wide methylation and TET1 and DNMT3B ChIP-Seq analysis, we conclude that TET proteins safeguard bivalent promoters from silencing by de novo methylation to ensure robust lineage-specific transcription upon differentiation.