Chemoresistance of leukemic cells has largely been attributed to clonal evolution secondary to accumulating mutations. Here, we show that a subset of leukemic blasts in contact with the mesenchymal stroma undergo cellular conversion into a distinct cell type that exhibits a stem cell-like phenotype and chemoresistance. These stroma-induced changes occurred in a reversible and stochastic manner driven by cross-talk, whereby stromal contact induces IL-4 in leukemic cells that in turn targets the mesenchymal stroma to facilitate the development of new subset. This mechanism was dependent on IL-4 mediated up-regulation of vascular cell adhesion molecule-1 in mesenchymal stroma, causing tight adherence of leukemic cells to mesenchymal progenitors for generation of new subsets. Together, our study reveals another class of chemoresistance in leukemic blasts via functional evolution through stromal cross-talk, and demonstrates dynamic switching of leukemic cell fates that could cause a non-homologous response to chemotherapy in concert with the patientspecific microenvironment.