Chemotherapy remains the mainstay of treatment for patients with advanced liposarcoma (LPS), but response rates are only 25% and the overall survival at 5 years is dismal at 20–34%. Translation of other therapies have not been successful and there has been no significant improvement in prognosis for nearly 20 years. The aberrant activation of the phosphatidylinositol 3-kinase (PI3K)/AKT pathway has been implicated in the aggressive clinical behavior LPS and in resistance to chemotherapy, but the precise mechanism remains elusive and efforts to target AKT clinically have failed. Here we show that the AKT-mediated phosphorylation of the transcription elongation factor IWS1, promotes the maintenance of cancer stem cells in both cell and xenograft models of LPS. In addition, phosphorylation of IWS1 by AKT contributes to a “metastable” cell phenotype, characterized by mesenchymal/epithelial plasticity. The expression of phosphorylated IWS1 also promotes anchorage-dependent and independent growth, cell migration, invasion, and tumor metastasis. In patients with LPS, IWS1 expression is associated with reduced overall survival, increased frequency of recurrence, and shorter time to relapse after resection. These findings indicate that IWS1-mediated transcription elongation is an important regulator of human LPS pathobiology in an AKT-dependent manner and implicate IWS1 as an important molecular target to treat LPS.