OUTLINE: This is a multicenter study. Induction: Patients receive oral dexamethasone twice daily on days 1-29, vincristine IV on days 1, 8, 15, and 22, and asparaginase intramuscularly (IM) on days 2, 5, 8, 12, 15, and 19. Patients receive methotrexate intrathecally (IT) on days 1 and 15. CNS 2 and 3 patients also receive methotrexate IT on days 8 and 22. Patients with M1 bone marrow receive oral mercaptopurine daily beginning on day 29. Patients with M2 bone marrow on day 29 receive oral dexamethasone twice daily on days 29-42, vincristine IV and daunorubicin IV over 15 minutes on days 29 and 36, and asparaginase IM on days 29, 32, 36, and 39. Patients with M3 bone marrow on day 29 or M2 or M3 bone marrow on day 43 are taken off study. Consolidation: Patients receive methotrexate IV over 4 hours once a week during weeks 7, 10, 13, 24, 27, and 30, oral leucovorin calcium every 6 hours for 5 doses beginning 42 hours after the start of methotrexate infusion, methotrexate IT during weeks 5, 9, 12, 16, 20, 21, and 29, asparaginase IM 3 times weekly during weeks 16 and 17, and oral mercaptopurine daily during weeks 5-14 and from week 24 until the end of consolidation. Patients receive oral dexamethasone twice daily during weeks 8, 16-18, and 28, vincristine IV on day 1 during weeks 8, 9, 16, 17, 18, 28, and 29, daunorubicin IV on day 1 during weeks 16, 17, and 18, cyclophosphamide IV over 30 minutes on day 1 during week 20, cytarabine IV or subcutaneously on days 2-5 during weeks 20 and 21, and oral thioguanine daily during weeks 20 and 21. Intensive continuation: Patients receive oral methotrexate every 6 hours for 24 hours during weeks 1, 3, 5, and 7, oral mercaptopurine daily, and oral leucovorin calcium every 12 hours for 1 day beginning 48 hours after the start of oral methotrexate. Patients also receive methotrexate IT during week 8, vincristine IV on day 1 during week 8, and oral dexamethasone twice daily for 7 days beginning with vincristine. Treatment repeats every 8 weeks for 6 courses. Another continuation: Patients receive oral methotrexate once weekly except during the week of methotrexate IT administration, oral mercaptopurine daily, methotrexate IT every 8 weeks, vincristine IV on day 1 during week 8, and oral dexamethasone twice daily for 7 days beginning with vincristine. Treatment continues for up to 130 weeks in the absence of disease progression or unacceptable toxicity. Patients are followed every 6 months for 4 years and then annually for ten years.