Activation-induced deaminase (AID)/APOBEC-family cytosine deaminases, known to function in diverse cellular processes from antibody diversification to mRNA editing, have also been implicated in DNA demethylation, a major process for transcriptional activation. Although oxidation-dependent pathways for demethylation have been described, pathways involving deamination of either 5-methylcytosine (5mC) or 5-hydroxymethylcytosine (5hmC) have emerged as alternatives. Here we address the biochemical plausibility of deamination-coupled demethylation. We found that purified AID/APOBECs have substantially reduced activity on 5mC relative to cytosine, their canonical substrate, and no detectable deamination of 5hmC. This finding was explained by the reactivity of a series of modified substrates, where steric bulk was increasingly detrimental to deamination. Further, upon AID/APOBEC overexpression, the deamination product of 5hmC was undetectable in genomic DNA, whereas oxidation intermediates remained detectable. Our results indicate that the steric requirements for cytosine deamination are one intrinsic barrier to the proposed function of deaminases in DNA demethylation.