The aldo-keto reductase AKR1C3, has been shown to regulate myelopoiesis via its ability to metabolise prostaglandin D2 (PGD2). Other studies have demonstrated the oxidative activation of polycyclic aromatic hydrocarbon (PAH) procarcinogens by AKR1C3 in cell-free systems. This is the first study that addresses whether AKR1C3 mediates carcinogen activation within intact living cells following manipulation of AKR1C3 by molecular intervention. Quantitative RT-PCR identified AKR1C3 as the predominant AKR1C isoform expressed in acute myeloid leukemia (AML). Exposure of K562 and KG1a myeloid cell lines to the known AKR1C3 substrate 7,12-dimethylbenz(a)anthracene-3,4-dihydrodiol (7,12-DMBA-3,4-diol) resulted in both single strand DNA breaks and oxidative DNA damage as measured using conventional and FPG-modified comet assays respectively. PGD2-keto reductase activity was shown to be correlated with relative AKR1C3 expression and together with quantitative real time PCR was used to validate the RNAi-knockdown of AKR1C3 in K562 cells. Knockdown of AKR1C3 did not alter single strand DNA breaks following 7,12-DMBA-3,4-diol exposure but significantly decreased oxidative DNA damage. A similar interrelationship between AKR1C3 activity and 7,12-DMBA-3,4-diol mediated oxidative DNA damage but not single strand breaks was observed in KG1a cells. Finally, AKR1C3 knockdown also resulted in spontaneous erythroid differentiation of K562 cells. Since K562 cells are a model of AML blast crisis of chronic myeloid leukemia (CML) the data presented here identify AKR1C3 as a novel mediator of carcinogen-induced initiation of leukemia, as a novel regulator of erythroid differentiation and paradoxically as a potential new target in the treatment of CML.