Hydroxymethylcytosine, well described in DNA, occurs also in RNA. Here, we show that hydroxymethylcytosine preferentially marks polyadenylated RNAs and is deposited by Tet in Drosophila. We map the transcriptome-wide hydroxymethylation landscape, revealing hydroxymethylcytosine in the transcripts of many genes, notably in coding sequences, and identify consensus sites for hydroxymethylation. We found that RNA hydroxymethylation can favor mRNA translation. Tet and hydroxymethylated RNA are found to be most abundant in the Drosophila brain, and Tet-deficient fruitflies suffer impaired brain development, accompanied by decreased RNA hydroxymethylation. This study highlights the distribution, localization, and function of cytosine hydroxymethylation and identifies central roles for this modification in Drosophila.