ClassIII peroxidases are multigene family of plant-specific peroxidase enzyme. They are involved in various physiological and developmental processes like auxin catabolism, cell metabolism, various biotic, abiotic stresses and cell elongation. In the present study, we identified a class III peroxidase (OsPRX38) from rice which is upregulated several folds in both arsenate (AsV) and arsenite (AsIII) stresses. The overexpression of OsPRX38 in Arabidopsis thaliana significantly enhances Arsenic (As) tolerance by increasing SOD, PRX GST activity and exhibited low H2O2, electrolyte leakage and malondialdehyde content. OsPRX38 overexpression also affect the plant growth by increasing total biomass and seeds production in transgenics than WT under As stress condition. Confocal microscopy revealed that the OsPRX38-YFP fusion protein was localized to the apoplast of the onion epidermal cells. In addition, lignification was positively correlated with an increase in cell-wall-associated peroxidase activities in transgenic plants. This study indicates the role of OsPRX38 in lignin biosynthesis, where lignin act as an apoplastic barrier for As entry in root cells leading to reduction of As accumulation in transgenic. Overall the study suggests that overexpression of OsPRX38 in Arabidopsis thaliana activates the signaling network of different antioxidant systems under As stress condition, enhancing the plant tolerance by reducing As accumulation due to high lignification.