Drinking water arsenic (WAs) exposure has been linked to a number of detrimental health outcomes including anemia, primarily among pregnant women. Little is known about the effects of arsenic (As) on hematological disorders among men. We have examined the role of As exposure on hematological indicators of anemia in a group of men exposed to a wide range of As in their drinking water. We conducted a cross-sectional investigation among 119 healthy men in the Health Effects of As Longitudinal Study (HEALS) cohort, in rural Bangladesh. The participants are part of an ongoing study focused on evaluating the influence of As and smoking on immune function. Samples were collected at recruitment and analyzed for water As, urinary As (UAs) and UAs metabolites to assess As exposure. Blood samples were also collected at recruitment and assayed immediately for hematological parameters. We found that increased WAs levels were associated with decreased red blood cell counts [β = −0.13, p < 0.0001] as well as hematocrit packed cell volumes [β = −0.68, p = 0.008] following adjustment for age, smoking, body mass index and polycyclic aromatic hydrocarbon-DNA adducts. Other measures of As exposure (UAs and its metabolites) demonstrated similar associations. Slightly stronger effects were observed among smokers. We also observed an effect of As on hemoglobin among smokers in relation to UAs [β = −0.54, p < 0.05]. Our analysis revealed effects of As exposure on hematological indicators of anemia in a group of healthy male smokers and non-smokers.