SETD2 is the sole histone methyltransferase responsible for H3K36me3, with roles in splicing, transcription initiation, and DNA damage response. Homozygous disruption of SETD2 yields a tumor suppressor effect in various cancers. However, SETD2 mutation is typically heterozygous in diffuse large B-cell lymphomas. Here we show that heterozygous Setd2 deficiency results in germinal center (GC) hyperplasia and increased competitive fitness, with reduced DNA damage checkpoint activity and apoptosis, resulting in accelerated lymphomagenesis. Impaired DNA damage sensing in Setd2-haploinsufficient germinal center B (GCB) and lymphoma cells associated with increased AICDA-induced somatic hypermutation, complex structural variants, and increased translocations including those activating MYC. DNA damage was selectively increased on the nontemplate strand, and H3K36me3 loss was associated with greater RNAPII processivity and mutational burden, suggesting that SETD2-mediated H3K36me3 is required for proper sensing of cytosine deamination. Hence, Setd2 haploinsufficiency delineates a novel GCB context-specific oncogenic pathway involving defective epigenetic surveillance of AICDA-mediated effects on transcribed genes. Significance: Our findings define a B cell-specific oncogenic effect of SETD2 heterozygous mutation, which unleashes AICDA mutagenesis of nontemplate strand DNA in the GC reaction, resulting in lymphomas with heavy mutational burden. GC-derived lymphomas did not tolerate SETD2 homozygous deletion, pointing to a novel context-specific therapeutic vulnerability. This article is highlighted in the In This Issue feature, p. 1599.