Arsenic is a well-known human skin carcinogen but the underlying mechanisms of carcinogenesis are unclear. Transcription factor Nrf2-mediated antioxidant response represents a critical cellular defense mechanism, and emerging data suggest that constitutive activation of Nrf2 contributes to malignant phenotype. In the present study when an immortalized, non-tumorigenic human keratinocyte cell line (HaCaT) was continuously exposed to environmentally relevant level of inorganic arsenite (100 nM) for 28 weeks, malignant transformation occurred as evidenced by the formation of highly aggressive squamous cell carcinoma after inoculation into nude mice. To investigate the mechanisms involved, a broad array of biomarkers for transformation were assessed in these arsenic-transformed cells (termed As-TM). In addition to increased secretion of matrix metalloproteinase-9 (MMP-9), a set of markers for squamous differentiation and skin keratinization, including keratin-1, keratin-10, involucrin, and loricrin, were significantly elevated in As-TM cells. Furthermore, As-TM cells showed increased intracellular glutathione, elevated expression of Nrf2 and its target genes, as well as generalized apoptotic resistance. In contrast to increased basal Nrf2 activity in As-TM cells, a diminished Nrf2-mediated antioxidant response induced by acute exposure to high dose of arsenite or tert-butyl hydroxyquinone occurred. The findings that multiple biomarkers for malignant transformation observed in As-TM cells, including MMP-9 and cytokeratins, are potentially regulated by Nrf2 suggest constitutive Nrf2 activation may be involved in arsenic carcinogenesis of skin. The weakened Nrf2 activation in response to oxidative stressors observed in As-TM cells, coupled with acquired apoptotic resistance, would potentially have increased the likelihood of transmittable oxidative DNA damage and fixation of mutational/DNA damage events.