The biological effect of benzene on the hematopoietic system has been known for over a century. The rapid advancement in understanding the biology of hematopoietic stem cells (HSCs) and cancer stem cells (CSCs) in recent years has renewed interest in investigating the role of stem cells in benzene-induced malignancy and bone marrow depression. The interplay between benzene and stem cells is complex involving the stem cell, progenitor, and HSC niche compartments of the bone marrow. In this prospect, benzene metabolites formed through metabolism in the liver and bone marrow cause damage in hematopoietic cells via multiple mechanisms that, in addition to traditionally recognized chromosomal aberration and covalent binding, incorporate oxidative stress, alteration of gene expression, apoptosis, error-prone DNA repair, epigenetic regulation, and disruption of tumor surveillance. However, benzene-exposed individuals exhibit variable susceptibility to benzene effect that arises, in part, from genetic variations in benzene metabolism, DNA repair, genomic stability, and immune function. These new studies of benzene leukemogenesis and hematotoxicity are expected to provide insights into how environmental and occupational chemicals affect stem cells to cause cancer and toxicity, which impact the risk assessment, permissible level, and therapy of benzene exposure.