The phase separation of N6-methyladenosine (m6A) binding protein YTHDF2 plays a vital role in arsenic-induced skin damage, and YTHDF2 can bind to m6A-methylated mRNA of tumor suppressor PTEN. However, whether and how YTHDF2 phase separation regulates PTEN involved in arsenic-induced malignant transformation of keratinocytes remains blank. Here, we established arsenite-induced transformation models with stable expression of wild-type YTHDF2 or mutant YTHDF2 protein in vitro and in vivo. We found that the YTHDF2 protein underwent phase separation during arsenite-induced malignant transformation of keratinocytes, and YTHDF2 phase separation promoted the malignant phenotype of keratinocytes. Mechanically, YTHDF2 phase separation reduced PTEN protein levels, which in turn activated the pro-survival AKT signal. The binding of YTHDF2 to multiple m6A sites on PTEN mRNA drove YTHDF2 phase separation, inhibiting PTEN translation initiation and thus reducing PTEN protein levels. YTHDF2 phase separation recruited translation-initiation-factor kinase EIF2AK1 to phosphorylate eIF2α, thereby inhibiting translation initiation of poly-m6A-methylated PTEN mRNA. Furthermore, arsenite-induced oxidative stress triggered YTHDF2 phase separation by increasing m6A levels of PTEN mRNA. Our results demonstrated that YTHDF2 phase separation promotes arsenite-induced malignant transformation by inhibiting PTEN translation in a poly-m6A-dependent manner. This study sheds light on arsenic carcinogenicity from the novel aspect of m6A-mediated YTHDF2 phase separation.