Incorporation of apoptosis-inducing agents into current therapeutic regimens is an attractive strategy to improve treatment for drug resistant leukemia. We tested the potential of arsenic trioxide (ATO) to restore the response to dexamethasone in glucocorticoid (GC)-resistant acute lymphoblastic leukemia (ALL). Low dose ATO markedly increased in vitro GC-sensitivity of ALL cells from T-cell and precursor B-cell ALL patients with poor in vivo response to prednisone. In GC-resistant cell lines, this effect was mediated, at least in part, by inhibition of Akt and affecting downstream Akt targets such as Bad, a proapoptotic Bcl-2 family member, and the X-linked inhibitor of apoptosis protein (XIAP). Combination of ATO and dexamethasone resulted in increased Bad and rapid downregulation of XIAP, while levels of the antiapoptotic regulator Mcl-1 remained unchanged. Expression of dominant active Akt, reduction of Bad expression by RNA interference or overexpression of XIAP abrogated the sensitizing effect of ATO. The inhibitory effect of XIAP overexpression was reduced when the Akt phosphorylation site was mutated (XIAP-S87A). These data suggest that the combination of ATO and glucocorticoids could be advantageous in GC-resistant ALL and reveal additional targets for the evaluation of new antileukemic agents.