Abstract Background Gene expression is epigenetically regulated by a combination of histone modifications and methylation of CpG dinucleotides in promoters. In normal cells, CpG-rich promoters are typically unmethylated, marked with histone modifications such as H3K4me3, and are highly active. During neoplastic transformation, CpG dinucleotides of CG-rich promoters become aberrantly methylated, corresponding with the removal of active histone modifications and transcriptional silencing. Outside of promoter regions, distal enhancers play a major role in the cell type-specific regulation of gene expression. Enhancers, which function by bringing activating complexes to promoters through chromosomal looping, are also modulated by a combination of DNA methylation and histone modifications. Results Here we use HCT116 colorectal cancer cells with and without mutations in DNA methyltransferases, the latter of which results in a 95% reduction in global DNA methylation levels. These cells are used to study the relationship between DNA methylation, histone modifications, and gene expression. We find that the loss of DNA methylation is not sufficient to reactivate most of the silenced promoters. In contrast, the removal of DNA methylation results in the activation of a large number of enhancer regions as determined by the acquisition of active histone marks. Conclusions Although the transcriptome is largely unaffected by the loss of DNA methylation, we identify two distinct mechanisms resulting in the upregulation of distinct sets of genes. One is a direct result of DNA methylation loss at a set of promoter regions and the other is due to the presence of new intragenic enhancers.