More than 50% of patients with chondrosarcomas exhibit gain-of-function mutations in either isocitrate dehydrogenase 1 (IDH1) or IDH2. In this study, we performed genome-wide CpG methylation sequencing of chondrosarcoma biopsies and found that IDH mutations were associated with DNA hypermethylation at CpG islands but not other genomic regions. Regions of CpG island hypermethylation were enriched for genes implicated in stem cell maintenance/differentiation and lineage specification. In murine 10T1/2 mesenchymal progenitor cells, expression of mutant IDH2 led to DNA hypermethylation and an impairment in differentiation that could be reversed by treatment with DNA-hypomethylating agents. Introduction of mutant IDH2 also induced loss of contact inhibition and generated undifferentiated sarcomas in vivo. The oncogenic potential of mutant IDH2 correlated with the ability to produce 2-hydroxyglutarate. Together, these data demonstrate that neomorphic IDH2 mutations can be oncogenic in mesenchymal cells.