When losing balance, upper-body movements serve as mechanical aids to regain stability. However, it remains unclear how these movements contribute to dynamic stability during recovery from a lateral loss of balance while walking with arm restriction. We aimed to (i) quantify the effect of arm restriction on gait stability and upper-body velocities and (ii) characterize upper-body kinematic strategies in response to lateral surface translations under different arm restriction conditions. Healthy adults were exposed to lateral surface translations while walking on a computerized treadmill under three conditions: ‘free arms’, ‘1-arm restricted’ and ‘2-arms restricted’. Dynamic stability and upper-body velocities for the first step after perturbation onset were extracted. We found decreased dynamic stability in the sagittal plane and increased trunk velocity in the ‘2-arms restricted’ condition compared with the ‘free arms’ condition. Head and trunk movements in the medio-lateral plane were in opposite directions in 44.31% of responses. Additionally, significant trunk velocities were observed in the opposite direction to the perturbation-induced loss of balance. Our results support the contribution of increased upper-body velocities to balance responses following arm-restricted walking perturbations and suggest that the ‘2-arms restricted’ condition may be utilized as a perturbation-based balance training, focusing on head and trunk responses.