RATIONALE: Drugs used in chemotherapy use different ways to stop cancer cells from dividing so they stop growing or die. Combining chemotherapy with peripheral stem cell transplantation may allow the doctor to give higher doses of chemotherapy drugs and kill more cancer cells.

PURPOSE: Phase I/II trial to study the effectiveness of high-dose chemotherapy plus peripheral stem cell transplantation in treating patients with chronic myelogenous or acute leukemia.

OBJECTIVES: I. Determine the maximum tolerated dose of decitabine in combination with busulfan and cyclophosphamide in patients with hematologic malignancies. II. Establish the pharmacokinetics of decitabine and busulfan in this patient population. III. Determine the effectiveness of this combination in achieving durable complete remission in patients with chronic myelogenous leukemia (CML) in blast crisis or acute myelogenous leukemia (AML) in relapse undergoing allogeneic stem cell transplantation.

OUTLINE: In cohorts of 3, patients receive escalating doses of decitabine (DAC) IV over 4 hours on days -8 and -7. Busulfan is administered orally every 6 hours on consecutive days -6 through -4. Cyclophosphamide is given by vein (IV) over 1 hour on consecutive days -3 and -2. The maximum tolerated dose of DAC is defined as the dose at which 2 patients experience dose limiting toxicity. Donors receive filgrastim subcutaneously (SQ) daily every 12 hours starting 2-4 days prior to the first stem cell collection and before DAC infusion. Leukapheresis is conducted daily. If insufficient number of cells are collected, blood marrow is harvested for supplementation. Stem cells are infused on day 0. For graft vs host disease prophylaxis (GVHD), patients receive tacrolimus IV beginning one day before stem cell infusion, then orally following tolerance to tacrolimus. Patients intolerant to tacrolimus receive cyclosporine IV beginning on day -2, then orally following tolerance and engraftment. All patients receive methylprednisolone given according to clinical grade of GVHD procedures. For CNS prophylaxis, methotrexate is given intrathecally or intraventricularly monthly, beginning on the second month through the eighth month of treatment. Allogeneic patients are followed until the end of 1 year.

PROJECTED ACCRUAL: An estimated 30 allogeneic recipients will be recruited in 2 years for the expected study duration of 2-3 years.

DISEASE CHARACTERISTICS: Acute leukemia past first remission or induction failure Chronic myelogenous leukemia in accelerated phase or blast crisis

PATIENT CHARACTERISTICS: Age: 15 to 55 Performance status: Zubrod 0-2 Life expectancy: Life expectancy not severely limited by concurrent illness Hematopoietic: Not specified Hepatic: No evidence of chronic active hepatitis or cirrhosis Bilirubin no greater than 2 times upper limit of normal SGPT no greater than 4 times upper limit of normal Renal: Creatinine no greater than 1.5 mg/dL Cardiovascular: Left ventricular ejection fraction at least 50% No uncontrolled arrhythmias or symptomatic cardiac disease Pulmonary: FEV1, FVC, and DLCO at least 50% No symptomatic pulmonary disease Other: Related donor who is HLA-identical required No effusion or ascites greater than 1 L prior to drainage HIV negative Not pregnant No active CNS disease

PRIOR CONCURRENT THERAPY: Not specified