Smoking-related lung tumors are characterized by profound epigenetic changes including scrambled patterns of DNA methylation, deregulated histone acetylation, altered gene expression levels, distorted microRNA profiles, and a global loss of cytosine hydroxymethylation marks. Here, we employed an enhanced version of bisulfite sequencing (RRBS/oxRRBS) followed by next generation sequencing to separately map DNA epigenetic marks 5-methyl-dC and 5-hydroxymethyl-dC in genomic DNA isolated from lungs of A/J mice exposed whole-body to environmental cigarette smoke for 10 weeks. Exposure to cigarette smoke significantly affected the patterns of cytosine methylation and hydroxymethylation in the lungs. Differentially hydroxymethylated regions were associated with inflammatory response/disease, organismal injury, and respiratory diseases and were involved in regulation of cellular development, function, growth, and proliferation. To identify epigenetic changes in the lung associated with exposure to tobacco carcinogens and inflammation, A/J mice were intranasally treated with the tobacco carcinogen 4-(methylnitrosamino)-1-(3-pyridyl)-1-butanone (NNK), the inflammatory agent lipopolysaccharide (LPS), or both. NNK alone caused minimal epigenetic alterations, while exposure either to LPS or NNK/LPS in combination led to increased levels of global cytosine methylation and formylation, reduced cytosine hydroxymethylation, decreased histone acetylation, and altered expression levels of multiple genes. Our results suggest that inflammatory processes are responsible for epigenetic changes contributing to lung cancer development.