Colorectal tumorigenesis is accompanied by the generation of oxidative stress, but how this controls tumor development is poorly understood. Here, we studied how the H2O2-reducing enzyme glutathione peroxidase 2 (GPx2) regulates H2O2 stress and differentiation in patient-derived 'colonosphere' cultures. GPx2 silencing caused accumulation of radical oxygen species, sensitization to H2O2-induced apoptosis and strongly reduced clone- and metastasis-forming capacity. Neutralization of radical oxygen species restored clonogenic capacity. Surprisingly, GPx2-suppressed cells also lacked differentiation potential and formed slow-growing undifferentiated tumors. GPx2 overexpression stimulated multi-lineage differentiation, proliferation and tumor growth without reducing tumor-initiating capacity. Finally, GPx2 expression was inversely correlated with H2O2-stress signatures in human colon tumor cohorts, but positively with differentiation and proliferation. Moreover, high GPx2 expression was associated with early tumor recurrence, particularly in the recently identified aggressive subtype of human colon cancer. We conclude that H2O2 neutralization by GPx2 is essential for maintaining clonogenic and metastatic capacity but also for the generation of differentiated proliferating tumor mass. The results reveal an unexpected redox-controlled link between tumor mass formation and metastatic capacity.