Even though pancreatic ductal adenocarcinoma (PDAC) is associated with fibrotic stroma, the molecular pathways regulating the formation of cancer associated fibroblasts (CAFs) are not well elucidated. An epigenomic analysis of patient-derived and de-novo generated CAFs demonstrated widespread loss of cytosine methylation that was associated with overexpression of various inflammatory transcripts including CXCR4. Co-culture of neoplastic cells with CAFs led to increased invasiveness that was abrogated by inhibition of CXCR4. Metabolite tracing revealed that lactate produced by neoplastic cells leads to increased production of alpha-ketoglutarate (aKG) within mesenchymal stem cells (MSCs). In turn, aKG mediated activation of the demethylase TET enzyme led to decreased cytosine methylation and increased hydroxymethylation during de novo differentiation of MSCs to CAF. Co-injection of neoplastic cells with TET-deficient MSCs inhibited tumor growth in vivo. Thus, in PDAC, a tumor-mediated lactate flux is associated with widespread epigenomic reprogramming that is seen during CAF formation.