We study the central dark matter (DM) cusp evolution in cosmological galactic halos. Models with and without baryons (baryons+DM, hereafter BDM model, and pure DM, PDM model, respectively) are advanced from identical initial conditions. The DM cusp properties are contrasted by a direct comparison of pure DM and baryonic models. We find a divergent evolution between the PDM and BDM models within the inner ~10 kpc region. The PDM model forms a R^{-1} cusp as expected, while the DM in the BDM model forms a larger isothermal cusp R^{-2} instead. The isothermal cusp is stable until z~1 when it gradually levels off. This leveling proceeds from inside out and the final density slope is shallower than -1 within the central 3 kpc (i.e., expected size of the R^{-1} cusp), tending to a flat core within ~2 kpc. This effect cannot be explained by a finite resolution of our code which produces only a 5% difference between the gravitationally softened force and the exact Newtonian force of point masses at 1 kpc from the center. Neither is it related to the energy feedback from stellar evolution or angular momentum transfer from the bar. Instead it can be associated with the action of DM+baryon subhalos heating up the cusp region via dynamical friction and forcing the DM in the cusp to flow out and to `cool down. The process described here is not limited to low z and can be efficient at intermediate and even high z.
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