OUTLINE: This is a randomized, multicenter study. Patients are assigned to 1 of 4 treatment groups based on disease status. Patients in groups 1-3 with a large leukemic cell mass, in particular those with a WBC greater than 25,000/mm3 and/or marked organomegaly, receive preinduction therapy comprising oral prednisolone (PRDL) 3 times a day on days 1-7 and vincristine (VCR) IV on day 1. Group 1 (low-risk acute lymphocytic leukemia (ALL)): First induction therapy: Patients receive oral PRDL 3 times a day on days 1-7 of weeks 1-4, asparaginase (ASP) IV over 30 minutes on days 1-7 of weeks 3 and 4, VCR IV and daunorubicin IV over 30 minutes on day 1 of weeks 1-4, and methotrexate (MTX) IT on day 1 of week 1. Patients who achieve complete remission (CR) after first induction therapy proceed to first consolidation therapy on group 1. Second induction therapy: Patients receive oral cyclophosphamide (CTX) IV on day 1 of weeks 5, 7, and 9; cytarabine (ARA-C) IV over 1 hour or subcutaneously on days 3-6 and MTX IT on day 3 of weeks 5-8; and oral mercaptopurine (MP) on days 1-7 of weeks 5-8 and day 1 of week 9. Patients who achieve CR during second induction therapy undergo prophylactic cranial irradiation 5 days a week for 2.4 weeks. Patients who achieve CR after second induction therapy proceed to group 3. First consolidation therapy: Patients receive high-dose MTX IV continuously with leucovorin calcium (CF) rescue on day 1, ASP IV over 1 hour on day 2, and oral MP on days 1-5 of weeks 13 and 15; and teniposide (VM-26) IV over 1 hour and ARA-C IV over 1 hour on days 1-5 of week 17. Triple intrathecal therapy (TIT) comprising MTX, ARA-C, and dexamethasone (DM) is also administered on day 1 of week 17. First reinduction therapy: Patients receive oral PRDL three times a day on days 1-7 and VCR IV and doxorubicin (DOX) IV over 30 minutes on day 1 of weeks 21-24, and TIT on day 1 of week 21. Second reinduction therapy: Patients receive CTX IV and TIT on day 1 of week 25, and ARA-C IV over 1 hour on days 3-6 and oral thioguanine (TG) on days 1-7 of weeks 25 and 26. Second consolidation therapy: Patients receive oral MP daily and oral MTX weekly during weeks 29-32, 34-38, 40-44, 46-50, and 52; high-dose MTX, CF rescue, and ASP as in first consolidation therapy during weeks 33 and 45; and VM-26, ARA-C, and TIT as in first consolidation therapy during weeks 39 and 51. Group 2 (T-cell ALL with or without mediastinal involvement): First induction therapy: Patients receive treatment as in first induction therapy on group 1. Patients with residual tumor greater than 2 cm after first induction therapy also undergo mediastinal radiotherapy 5 days a weeks for 2.4-2.7 weeks concurrently with prophylactic cranial irradiation. Second induction therapy: Patients receive treatment as in second induction therapy on group 1. First consolidation therapy: Patients receive high-dose ARA-C IV over 3 hours every 12 hours on days 1-4 and mitoxantrone (DHAD) IV over 30 minutes on days 3-5 during week 13; and high-dose MTX, CF rescue, ASP, and MP as in first consolidation therapy on group 1 during week 17. First reinduction therapy: Patients receive treatment as in first reinduction therapy on group 1. Second reinduction therapy: Patients receive treatment as in second reinduction therapy on group 1. Second consolidation therapy: Patients receive MP and MTX as in second consolidation therapy on group 1; CTX IV, ARA-C IV continuously, and TIT on day 1 during weeks 33 and 45; and VM-26, ARA-C, and TIT as in first consolidation therapy on group 1 during weeks 39 and 51. Group 3 (high-risk ALL): First induction therapy: Patients receive treatment as in first induction therapy on group 1. Second induction therapy: Patients receive CNS-effective chemotherapy comprising high-dose ARA-C every 12 hours on days 1-4 and DHAD IV over 30 minutes on days 3-5 during week 6. First consolidation therapy: Patients receive high-dose MTX, CF rescue, and ASP as in first consolidation therapy on group 1; and CTX, ARA-C, and TIT as in second consolidation therapy on group 2 during week 17. First reinduction therapy: Patients receive treatment as in first reinduction therapy on group 1. Second reinduction therapy: Patients receive treatment as in second reinduction therapy on group 1. Second consolidation therapy: Patients receive MP and MTX as in second consolidation therapy on group 1; treatment as in second induction therapy on group 3 during week 33; high-dose MTX, CF rescue, ASP, and MP as in first consolidation therapy on group 1 during week 39; CTX, ARA-C, and TIT as in second consolidation therapy on group 2 during week 45; and VM-26, ARA-C, and TIT as in first consolidation therapy on group 1 during week 51. Groups 1-3: Patients who are age 15 to 50, achieve first CR, and have a suitable donor undergo allogeneic bone marrow transplantation. Patients who are under age 40 undergo bone marrow transplantation from a matched unrelated donor. Patients who have Philadelphia chromosome/bcr-abl positive disease and no suitable donor undergo purged autologous peripheral blood stem cell transplantation instead of reinduction therapy during first CR. CNS therapy: Patients with CNS disease at entry receive TIT 2 or 3 times weekly beginning immediately upon diagnosis and continuing until 5 doses after blasts are cleared from the CSF. Patients on group 1 and 2 undergo irradiation of the entire neuraxis 5 days a week for 2.7-3.2 weeks during second induction therapy. Maintenance therapy: After completion of 1 year of treatment on group 1, 2, or 3, patients are randomized to 1 of 2 treatment arms. Arm I: Patients receive MP daily and MTX weekly on odd-numbered months between months 13-30; CTX, ARA-C, and TIT as in second consolidation therapy on group 2 during months 14, 20, and 26; VM-26, ARA-C, and TIT as in first consolidation therapy on group 1 during months 16, 22, and 28; and high-dose MTX, CF rescue, and ASP as in first consolidation therapy on group 1 during months 18, 24, and 30. Arm II: Patients receive MP plus MTX as in second consolidation therapy on group 1 continuously and TIT every 2 months during months 13-30. Group 4 (B-cell ALL): Pretreatment: Patients who are age 50 and under receive CTX IV over 1 hour and oral PRDL 3 times a day on days 1-5. Patients who are over age 50 receive CTX IV and oral DM on days 1, 3, and 5. Treatment: Patients receive alternating therapy on blocks A and B. Block A therapy consists of VCR IV, MTX IV continuously, and CF rescue on day 1; ifosfamide IV over 1 hour and oral DM on days 1-5; VM-26 IV over 1 hour and ARA-C IV over 1 hour every 12 hours on days 4 and 5; and TIT on days 1 and 5. Block B therapy consists of VCR IV, MTX IV continuously, and CF rescue on day 1; CTX IV over 1 hour and oral DM on days 1-5; DOX IV over 15 minutes on days 4 and 5; and TIT on days 1 and 5. Blocks A and B continue every 3 weeks for a total of 6 courses. Patients who have not achieved CR after 3 courses or who develop disease progression at any time may optionally receive vindesine, ARA-C, etoposide, and DM. Patients with CNS disease undergo craniospinal irradiation after 2 courses of systemic chemotherapy (block A and B therapy). Patients receive TIT 2-3 times weekly until CSF is clear after block A therapy only if response is unsatisfactory.