The Ferritin heavy polypeptide-like 17 (Fthl17) gene is a member of the cancer/testis antigen gene family, and is preferentially expressed in cancer cells and in testis. Although DNA methylation has been linked to the regulation of human FTHL17 gene expression, detailed epigenetic regulation of its expression has not been investigated. To address this, we assessed the epigenetic regulation of murine Fthl17 gene expression in cancer cells and germ cells. Fthl17 was more highly expressed in testis, a murine lung cancer cell line, KLN205, and in germline stem cells (GSCs) than in normal lung tissues. Furthermore, the Fthl17 expression level in GSCs was significantly higher than in KLN205 cells. We performed bisulfite-sequencing and luciferase (luc) reporter assays to examine the role of DNA methylation of the Fthl17 promoter in the regulation of Fthl17 expression. In KLN205 cells, testis, and GSCs, the Fthl17 5'-upstream region was hypo-methylated compared with normal lung tissues. Luc reporter assays indicated that hypo-methylation of the -0.6 kb to 0 kb region upstream from the transcription start site (TSS) was involved in the up-regulation of Fthl17 expression in KLN205 cells and GSCs. Because the -0.6 kb to -0.3 kb or the -0.3 kb to 0 kb region were relatively more hypo-methylated in KLN205 cells and in GSCs, respectively, compared with other regions between -0.6 kb to 0 kb, those regions may contribute to Fthl17 up-regulation in each cell type. Following treatment with 5-Azacytidine, the -0.3 kb to 0 kb region became hypo-methylated, and Fthl17 expression was up-regulated in KLN205 cells to a level comparable to that in GSCs. Together, the results suggest that hypo-methylation of different but adjacent regions immediately upstream of the Fthl17 gene contribute to differential expression levels in lung cancer cells and GSCs, and hypo-methylation of the TSS-proximal region may be critical for high level expression.