Transcriptional regulation is commonly governed by alternative promoters. However, the regulatory architecture in alternative and reference promoters, and how they differ, remains elusive. In 100 CAGE-seq libraries from hepatocellular carcinoma patients, here we annotate 4083 alternative promoters in 2926 multi-promoter genes, which are largely undetected in normal livers. These genes are enriched in oncogenic processes and predominantly show association with overall survival. Alternative promoters are narrow nucleosome depleted regions, CpG island depleted, and enriched for tissue-specific transcription factors. Globally tumors lose DNA methylation. We show hierarchical retention of intragenic DNA methylation with CG-poor regions rapidly losing methylation, while CG-rich regions retain it, a process mediated by differential SETD2, H3K36me3, DNMT3B, and TET1 binding. This mechanism is validated in SETD2 knockdown cells and SETD2-mutated patients. Selective DNA methylation loss in CG-poor regions makes the chromatin accessible for alternative transcription. We show alternative promoters can control tumor transcriptomes and their regulatory architecture.