Cancer cells adapt to treatment, leading to the emergence of clones that are more aggressive and resistant to anti-cancer therapies. We have a limited understanding of the development of treatment resistance as we lack technologies to map the evolution of cancer under the selective pressure of treatment. To address this, we developed a hierarchical, dynamic lineage tracing method called FLARE (Following Lineage Adaptation and Resistance Evolution). We use this technique to track the progression of acute myeloid leukemia (AML) cell lines through exposure to Cytarabine (AraC), a front-line treatment in AML, in vitro and in vivo. We map distinct cellular lineages in murine and human AML cell lines predisposed to AraC persistence and/or resistance via the upregulation of cell adhesion and motility pathways. Additionally, we highlight the heritable expression of immunoproteasome 11S regulatory cap subunits as a potential mechanism aiding AML cell survival, proliferation, and immune escape in vivo. Finally, we validate the clinical relevance of these signatures in the TARGET-AML cohort, with a bisected response in blood and bone marrow. Our findings reveal a broad spectrum of resistance signatures attributed to significant cell transcriptional changes. To our knowledge, this is the first application of dynamic lineage tracing to unravel treatment response and resistance in cancer, and we expect FLARE to be a valuable tool in dissecting the evolution of resistance in a wide range of tumor types.