Abstract: Telomere repeats at the ends of human chromosomes protect chromosomes from degradation, and telomerase has a prominent role in telomere maintenance. Telomerase also affects cell proliferation, DNA replication, differentiation, and tumourigenesis. TERT (telomerase reverse transcriptase enzyme) is the catalytic subunit of telomerase and is critical for enzyme activity. TERT promoter mutations and promoter methylation are strongly associated with increased telomerase activation in cancer cells. Notably, TERT and telomerase are downregulated in stem cells during their differentiation. Therefore, the link between differentiation and telomerase provides a valuable tool for studying the epigenetic regulation of TERT enzyme. Oxygen tension affects several cellular behaviours including proliferation, metabolic activity, stemness, and differentiation. The role of oxygen tension in driving promoter modifications of the TERT gene in embryonic stem cells (ESCs) is poorly understood either in vitro or in vivo. We adopted a monolayer ESCs differentiation model to explore the role of low, physiological, oxygen (physoxia) in the epigenetic regulation of telomerase and associated genes, including TERT, DNMTs, and HDACs. Cells were cultured in either air, a 2% O2 incubator, or a 2% O2 oxygen workstation to provide a fully defined 2% O2 environment. Pre-gassed media (pre-conditioned to 2% O2 in a HypoxyCool unit) was used in all 2% O2 experimentation. As anticipated, physoxia culture increased the proliferation rate and stemness of ESCs and a slower onset of differentiation in physoxia was evident. Further, downregulated TERT expression was correlated to reduced telomerase activity during differentiation. TERT expression and telomerase activity remained significantly elevated in physoxia during differentiation. A substantial increase in TERT promoter methylation levels was noted during differentiation. Chemical inhibition of DNMT3B reduced TERT promoter methylation and was associated with increased TERT gene and telomerase activity during differentiation. DNMT3B CHiP demonstrated that downregulated TERT expression and increased proximal promoter methylation were associated with DNMT3B binding to the promoter. In conclusion, we have demonstrated that DNMT3B can directly bind TERT promoter, change its methylation levels, and contribute to regulation of telomerase activity.