Notch signaling plays a complex role in carcinogenesis, and its signaling pathway has both tumor-suppressor and oncogenic components. In this study we investigated the effects of reactive oxygen species (ROS) on Notch1 signaling outcome in keratinocyte biology. We demonstrate that Notch1 function contributes to the arsenic-induced keratinocyte transformation. We found that acute exposure to arsenite increases oxidative stress and inhibits proliferation of keratinocyte cells by upregulation of p21(waf1/Cip1). The necessity of p21(waf1/Cip1) for arsenite-induced cell death was demonstrated by targeted downregulation of p21(waf1/Cip1) by using RNA interference. We further demonstrated that on acute exposure to arsenite, p21(waf1/Cip1) is upregulated and Notch1 downmodulated, whereas on chronic exposure to arsenite, malignant progression of arsenite-treated keratinocytes cells was accompanied by regained expression and activity of Notch1. Notch1 activity in arsenite-transformed keratinocytes inhibits arsenite-induced upregulation of p21(waf1/Cip1) by sustaining c-myc expression. We further demonstrated that c-myc collaborates with Nrf2, a key regulator for the maintenance of redox homeostasis, to promote metabolic activities that support cell proliferation and cytoprotection. Therefore, Notch1-mediated repression of p21(waf1/Cip1) expression results in the inhibition of cell death and keratinocytes transformation. Our results not only demonstrate that sustained Notch1 expression is at least one key event implicated in the arsenite human skin carcinogenic effect, but also may provide mechanistic insights into the molecular aspects that determine whether Notch signaling will be either oncogenic or tumor suppressive.