Altered DNA methylation occurs ubiquitously in human cancer from the earliest measurable stages. A cogent approach to understanding the mechanism and timing of altered DNA methylation is to analyze it in the context of carcinogenesis by a defined agent. Epstein-Barr virus (EBV) is a human oncogenic herpesvirus associated with lymphoma and nasopharyngeal carcinoma, but also used commonly in the laboratory to immortalize human B-cells in culture. Here we have performed whole-genome bisulfite sequencing of normal B-cells, activated B-cells, and EBV-immortalized B-cells from the same three individuals, in order to identify the impact of transformation on the methylome. Surprisingly, large-scale hypomethylated blocks comprising two-thirds of the genome were induced by EBV immortalization but not by B-cell activation per se. These regions largely corresponded to hypomethylated blocks that we have observed in human cancer, and they were associated with gene-expression hypervariability, similar to human cancer, and consistent with a model of epigenomic change promoting tumor cell heterogeneity. We also describe small-scale changes in DNA methylation near CpG islands. These results suggest that methylation disruption is an early and critical step in malignant transformation.