Recent studies indicate that interactions between leukemia cells and the bone marrow (BM) microenvironment promote leukemia cell survival and confer resistance to anti-leukemic drugs. There is evidence that BM microenvironment contains hypoxic areas that confer survival advantage to hematopoietic cells. In the present study we investigated whether hypoxia in leukemic BM contributes to the protective role of the BM microenvironment. We observed a marked expansion of hypoxic BM areas in immunodeficient mice engrafted with acute lymphoblastic leukemia (ALL) cells. Consistent with this finding, we found that hypoxia promotes chemoresistance in various ALL derived cell lines. These findings suggest to employ hypoxia-activated prodrugs to eliminate leukemia cells within hypoxic niches. Using several xenograft models, we demonstrated that administration of the hypoxia-activated dinitrobenzamide mustard, PR-104 prolonged survival and decreased leukemia burden of immune-deficient mice injected with primary acute lymphoblastic leukemia cells. Together, these findings strongly suggest that targeting hypoxia in leukemic BM is feasible and may significantly improve leukemia therapy.