Wild‐type TP53 exons 5–8 contain CpG dinucleotides that are prone to methylation‐dependent mutation during carcinogenesis, but the regulatory effects of methylation affecting these CpG sites are unclear. To clarify this, we first assessed site‐specific TP53 CpG methylation in normal and transformed cells. Both DNA damage and cell ageing were associated with site‐specific CpG demethylation in exon 5 accompanied by induction of a truncated TP53 isoform regulated by an adjacent intronic promoter (P2). We then synthesized novel synonymous TP53 alleles with divergent CpG content but stable encodement of the wild‐type polypeptide. Expression of CpG‐enriched TP53 constructs selectively reduced production of the full‐length transcript (P1), consistent with a causal relationship between intragenic demethylation and transcription. 450K methylation comparison of normal (TP53‐wildtype) and cancerous (TP53‐mutant) human cells and tissues revealed focal cancer‐associated declines in CpG methylation near the P1 transcription start site, accompanied by rises near the alternate exon 5 start site. These data confirm that site‐specific changes of intragenic TP53 CpG methylation are extrinsically inducible, and suggest that human cancer progression is mediated in part by dysregulation of damage‐inducible intragenic CpG demethylation that alters TP53 P1/P2 isoform expression. © 2015 The Authors. Molecular Carcinogenesis Published by Wiley Periodicals, Inc.