Aberrant methylation has been regarded as a hallmark of cancer. 5-hydroxymethylcytosine (5hmC) is recently identified as the ten-eleven translocase (ten-eleven translocase)-mediated oxidized form of 5-methylcytosine, which plays a substantial role in DNA demethylation. Cell-free DNA has been introduced as a promising tool in the liquid biopsy of cancer. There are increasing evidence indicating that 5hmC in cell-free DNA play an active role during carcinogenesis. However, it remains unclear whether 5hmC could surpass classical markers in cancer detection, treatment, and prognosis. Here, we systematically reviewed the recent advances in the clinic and basic research of DNA 5-hydroxymethylation in cancer, especially in cell-free DNA. We further discuss the mechanisms underlying aberrant 5hmC patterns and carcinogenesis. Synergistically, 5-hydroxymethylation may act as a promising biomarker, unleashing great potential in early cancer detection, prognosis, and therapeutic strategies in precision oncology.