An immunosuppressive microenvironment promoting leukemia cell immune escape plays an important role in the pathogenesis of AML. Through its interaction with cereblon, a substrate receptor for the E3 ubiquitin ligase complex, pomalidomide leads to selective ubiquitination of transcription factors Aiolos and Ikaros thereby promoting immune modulation. In this phase I trial, 51 newly diagnosed non-favorable risk AML and high-risk MDS patients were enrolled and treated with AcDVP16 (cytarabine 667 mg/m2/day IV continuous infusion days 1-3, daunorubicin 45 mg/m2 IV days 1-3, etoposide 400 mg/m2 IV days 8-10) induction therapy followed by dose- and duration-escalation pomalidomide beginning at early lymphocyte recovery. Forty-three patients (AML: n = 39, MDS: n = 4) received pomalidomide. The maximum tolerated dose of pomalidomide was 4 mg for 21 consecutive days. The overall complete remission (CR + CRi) rate, median overall survival, and disease-free survival were 75%, 27.1 and 20.6 months, respectively. Subset analyses revealed 86% CR/CRi rate in AML patients with unfavorable-risk karyotype treated with pomalidomide. Pomalidomide significantly decreased Aiolos expression in both CD4+ and CD8+ peripheral blood and bone marrow T cells, promoted T cell differentiation, proliferation, and heightened their cytokine production. Finally, pomalidomide induced distinct gene expression changes in immune function-related ontologies in CD4+ and CD8+ T cells.