Inorganic arsenic is a human carcinogen associated with several types of cancers, including liver cancer. Inorganic arsenic has been postulated to target stem cells, causing their oncogenic transformation. This is proposed to be one of the key events in arsenic-associated carcinogenesis; however, the underlying mechanisms for this process remain largely unknown. To address this question, human hepatic HepaRG cells, at progenitor and differentiated states, were continuously treated with a noncytotoxic concentration of 1 μM sodium arsenite (NaAsO2). The HepaRG cells demonstrated active intracellular arsenite metabolism that shared important characteristic with primary human hepatocytes. Treatment of proliferating progenitor-like HepaRG cells with NaAsO2 inhibited their differentiation into mature hepatocyte-like cells, up-regulated genes involved in cell growth, proliferation, and survival, and down-regulated genes involved in cell death. In contrast, treatment of differentiated hepatocyte-like HepaRG cells with NaAsO2 resulted in enhanced cell death of mature hepatocyte-like cells, overexpression of cell death-related genes, and down-regulation of genes in the cell proliferation pathway, while biliary-like cells remained largely unaffected. Mechanistically, the cytotoxic effect of arsenic on mature hepatocyte-like HepaRG cells may be attributed to arsenic-induced dysregulation of cellular iron metabolism. The inhibitory effect of NaAsO2 on the differentiation of progenitor cells, the resistance of biliary-like cells to cell death, and the enhanced cell death of functional hepatocyte-like cells resulted in stem-cell activation. These effects favored the proliferation of liver progenitor cells that can serve as a source of initiation and driving force of arsenic-mediated liver carcinogenesis.