Anti-cancer drugs generally target cancer cells rather than normal somatic cells. However, the factors that determine this differential sensitivity are poorly understood. Here we show that Arf/p53-dependent down-regulation of H2AX induced the selective survival of normal cells after drug treatment, resulting in the preferential targeting of cancer cells. Treatment with camptothecin, a topoisomerase I inhibitor, caused normal cells to down-regulate H2AX and become quiescent, a process mediated by both Arf and p53. In contrast, transformed cells that harbor mutations in either Arf or p53 do not down-regulate H2AX and are more sensitive to drugs unless they have developed drug resistance. Such transformation-associated changes in H2AX expression rendered cancer cells more susceptible to drug-induced damage (by two orders of magnitude). Thus, the expression of H2AX and gamma H2AX (phosphorylated form of H2AX at Ser-139) is a critical factor that determines drug sensitivity and should be considered when administering chemotherapy.