Unlike other eukaryotes, the protein-coding genes of Trypanosoma cruzi are arranged in large polycistronic gene clusters transcribed by polymerase II (Pol II). Thus, it is thought that trypanosomes rely solely on posttranscriptional processes to regulate gene expression. Here, we show that the glucosylated thymine DNA base (β-d-glucosyl-hydroxymethyluracil or base J) is present within sequences flanking the polycistronic units (PTUs) in T. cruzi. The loss of base J at sites of transcription initiation, via deletion of the two enzymes that regulate base J synthesis (JBP1 and JBP2), correlates with an increased rate of Pol II transcription and subsequent genome-wide increase in gene expression. The affected genes include virulence genes, and the resulting parasites are defective in host cell invasion and egress. These studies indicate that base J is an epigenetic factor regulating Pol II transcription initiation in kinetoplastids and provides the first biological role of the only hypermodified DNA base in eukaryotes.