DISEASE CHARACTERISTICS: - Patients must have morphologically confirmed diagnosis of myelodysplastic syndromes (MDS) or chronic myelomonocytic leukemia (CMML) based on one of the following: - French-American-British (FAB) classifications: - Refractory anemia with excess blasts (RAEB - defined as having 5-20% myeloblasts in the bone marrow) - Chronic myelomonocytic leukemia (CMML) with 10-19% myeloblasts in the bone marrow and/or 5-19% blasts in the blood - World Health Organization (WHO) Classifications: - Refractory anemia with excess blasts-1 (RAEB-1 - defined as having 5-9% myeloblasts in the bone marrow) - Refractory anemia with excess blasts-2 (RAEB-2 - defined as having 10- 19% myeloblasts in the bone marrow and/or 5-19% blasts in the blood) - Chronic myelomonocytic leukemia-1 (CMML-1 - defined as having < 5% myeloblasts in the bone marrow and/or < 10% blasts in the blood) - Chronic myelomonocytic leukemia-2 (CMML-2 - defined as having 10-19% myeloblasts in the bone marrow and/or 5-19% blasts in the blood - International prognostic score (IPSS) of Intermediate 2 (1.5-2.0 points) or High (≥ 2.5 points); a score of Intermediate 1 (0.5-1.0 points) is only allowable in the setting of ≥ 5% myeloblasts - Patients with acute myeloid leukemia (AML) are not eligible - Cytogenetics requirements: - Southwestern Oncology Group (SWOG) (and other sites not affiliated with Cancer and Leukemia Group B [CALGB] or Eastern Cooperative Oncology Group [ECOG]): Pretreatment cytogenetics must be performed on all patients; collection of pretreatment specimens must be completed within 14 days prior to registration to SWOG-S1117 - CALGB: CALGB patients must enroll on CALGB 8461, the cytogenetics protocol - ECOG: ECOG patients must be registered on ECOG-E3903 - Banking requirements: - SWOG (and other sites not affiliated with CALGB or ECOG): Patients must be offered participation in specimen banking - CALGB: CALGB patients must be offered participation in CALGB 9665, the CALGB Leukemia Tissue bank protocol - ECOG: ECOG patients must be offered participation in specimen banking via ECOG-E3903 PATIENT CHARACTERISTICS: - Patients must have Zubrod performance status of 0-2 - Patients must not have any pre-existing neurotoxicity/neuropathy of ≥ grade 2 according to the National Cancer Institute (NCI) Common Toxicity Criteria Version 4.0, or prior ≥ grade 3 allergic reaction/hypersensitivity or rash to thalidomide that has not resolved to < grade 2 - Patients must not have any serious medical condition, laboratory abnormality, or psychiatric illness that, in the view of the treating physician, would place the participant at an unacceptable risk if he or she were to participate in the study or would prevent that person from giving informed consent - Patients must not have history of thromboembolic event or other condition requiring current use of anticoagulation with coumadin (warfarin) or low molecular-weight heparin - Patients must not have known or suspected hypersensitivity to mannitol - Females of childbearing potential (FCBP) must have a negative serum or urine pregnancy test with a sensitivity of at least 25 mIU/mL within 10 - 14 days prior to registration; FCBP must agree to have a second pregnancy test within 24 hours prior to starting course 1 if randomized to receive lenalidomide - Patients must commit to the following if they are randomized to receive lenalidomide: FCBP must either commit to continued abstinence from heterosexual intercourse or begin TWO acceptable methods of birth control: one highly effective method and one additional effective method AT THE SAME TIME, at least 28 days before starting lenalidomide; FCBP must also agree to ongoing pregnancy testing; men must agree to use a latex condom during sexual contact with a FCBP, even if they have had a successful vasectomy - Patients not randomized to receive lenalidomide will not be required to undergo serial pregnancy testing or lenalidomide counseling after registration - No prior malignancy is allowed except for adequately treated basal (or squamous cell) skin cancer, in situ cervical cancer, or other cancer for which the patient has been disease free for five years PRIOR CONCURRENT THERAPY: - Patients must not have received lenalidomide, azacitidine, vorinostat, or decitabine as treatment previously - Patients may have received low-dose cytarabine for MDS treatment previously, but they must have discontinued its use for at least 28 days prior to registration - Any hematopoietic growth factors must be stopped for at least 14 days prior to registration - Patients must not have received radiation therapy, chemotherapy, or cytotoxic therapy to treat conditions other than MDS within 12 months prior to registration - No prior stem cell or bone marrow transplantation at any time - Patients must not have received greater than physiologic doses of a corticosteroid agent (dose equivalent to > 10 mg/day of prednisone) within 28 days prior to registration - Patients must not have used or be using histone deacetylase (HDAC) inhibitor agents for anticancer treatment - Patients may not have received agents such as valproic acid for epilepsy within 30 days prior to registration - Prohibited concomitant therapies include investigational agents, androgens, supraphysiologic doses of corticosteroids, erythropoietin, or chemotherapeutic agents active against MDS or CMML