The inactivation of tumour suppressor genes is a key step in cancer development, and is usually achieved by homozygous loss. In prostate cancer, however, large genomic regions are often hemizygously lost, which complicates the identification of putative tumour suppressors in these regions. Here, we develop Epi2Hit, an integrative computational method that leverages whole genome sequencing, epigenomic profiling and gene expression to identify biallelic inactivation of tumour suppressor genes involving DNA methylation of promoter and enhancer regions of one allele and genomic loss of the other allele. We apply Epi2Hit to a cohort of 2,021 prostate cancers to discover tumour suppressor genes. In particular, we identify epigenetic biallelic inactivation of ZFHX3 at a recurrence level similar to TP53. Biallelic inactivation of ZFHX3, a transcriptional repressor, leads to upregulation of oncogenes, including MYC and a shorter time to metastasis. Finally, we provide evidence that epigenetic silencing as 2nd hit is particularly enriched in regions with nearby essential genes, precluding homozygous loss.