Arsenic is a well-known human carcinogen that affects millions of people worldwide, but the underlying mechanisms of carcinogenesis are unclear. Several epidemiological studies have suggested increased prostate cancer incidence and mortality due to exposure to arsenic. Due to lack of an animal model of arsenic-induced carcinogenesis, we used a prostate epithelial cell culture model to identify a role for mitochondria in arsenic-induced prostate cancer. Mitochondrial morphology and membrane potential was impacted within a few hours of arsenic exposure of non-neoplastic prostate epithelial cells. Chronic arsenic treatment induced mutations in mitochondrial genes and altered mitochondrial functions. Human non-neoplastic prostate epithelial cells continuously cultured for seven months in the presence of 5 µM arsenite showed tumorigenic properties in vitro and induced tumors in SCID mice, which indicated transformation of these cells. Protein and mRNA expression of subunits of mtOXPHOS complex I were decreased in arsenic-transformed cells. Alterations in complex I, a main site for reactive oxygen species (ROS) production as well as increased expression of ROS-producing NOX4 in arsenic-transformed cells suggested a role of oxidative stress in tumorigenic transformation of prostate epithelial cells. Whole genome cGH array analyses of arsenic-transformed prostate cells identified extensive genomic instability. Our study revealed mitochondrial dysfunction induced oxidative stress and decreased expression of p53 in arsenic-transformed cells as an underlying mechanism of the mitochondrial and nuclear genomic instability. These studies suggest that early changes in mitochondrial functions are sustained during prolong arsenic exposure. Overall, our study provides evidence that arsenic disruption of mitochondrial function is an early and key step in tumorigenic transformation of prostate epithelial cells.