Enzymatic oxidation of 5-methylcytosine (5mC) in DNA by the Tet dioxygenases reprograms genome function in embryogenesis and postnatal development. Tet-oxidized derivatives of 5mC such as 5-hydroxymethylcytosine (5hmC) act as transient intermediates in DNA demethylation or persist as durable marks, yet how these alternative fates are specified at individual CpGs is not understood. Here, we report that the SOS response-associated peptidase (SRAP) domain protein Srap1, the mammalian ortholog of an ancient protein superfamily associated with DNA damage response operons in bacteria, binds to Tet-oxidized forms of 5mC in DNA and catalyzes turnover of these bases to unmodified cytosine by an autopeptidase-coupled nuclease. Biallelic inactivation of murine Srap1 causes embryonic sublethality associated with widespread accumulation of ectopic 5hmC. These findings establish a function for a class of DNA base modification-selective nucleases and position Srap1 as a determinant of 5mC demethylation trajectories during mammalian embryonic development.