Ten-eleven translocation (TET) proteins play key roles in the regulation of DNA-methylation status by oxidizing 5-methylcytosine (5mC) to generate 5-hydroxymethylcytosine (5hmC), which can both serve as a stable epigenetic mark and participate in active demethylation. Unlike the other members of the TET family, TET2 does not contain a DNA-binding domain, and it remains unclear how it is recruited to chromatin. Here we show that TET2 is recruited by the RNA-binding protein Paraspeckle component 1 (PSPC1) through transcriptionally active loci, including endogenous retroviruses (ERVs) whose long terminal repeats (LTRs) have been co-opted by mammalian genomes as stage- and tissue-specific transcriptional regulatory modules. We found that PSPC1 and TET2 contribute to ERVL and ERVL-associated gene regulation by both transcriptional repression via histone deacetylases and post-transcriptional destabilization of RNAs through 5hmC modification. Our findings provide evidence for a functional role of transcriptionally active ERVs as specific docking sites for RNA epigenetic modulation and gene regulation.