Liposarcoma (LPS) can be divided into 4 different subtypes, of which well-differentiated LPS (WDLPS) and dedifferentiated LPS (DDLPS) are the most common. WDLPS is typically low grade, whereas DDLPS is high grade, aggressive, and carries a worse prognosis. WDLPS and DDLPS frequently co-occur in patients. However, it is not clear whether DDLPS arises independently from WDLPS, or whether epigenomic alterations underly the histopathological differences of these subtypes. Here, we profiled 9 epigenetic marks in tumor samples from 151 patients with LPS and showed elevated trimethylation of histone H3 at Lys9 (H3K9me3) levels in DDLPS tumors. Integrated ChIP-seq and gene expression analyses of patient-derived cell lines revealed that H3K9me3 mediates differential regulation of genes involved in cellular differentiation and migration. Among these, Kruppel-like factor 6 (KLF6) was reduced in DDLPS, with increased H3K9me3 at associated regulatory regions. Pharmacologic inhibition of H3K9me3 with chaetocin decreased DDLPS proliferation and increased expression of the adipogenesis-associated factors PPARγ, CEBPα, and CEBPβ, suggesting that increased H3K9me3 may mediate DDLPS-associated aggressiveness and dedifferentiation properties. KLF6 overexpression partially phenocopied chaetocin treatment in DDLPS cells and induced phenotypic changes that were consistent with adipocytic differentiation, suggesting that the effects of increased H3K9me3 may be mediated through KLF6. In conclusion, we provide evidence of an epigenetic basis for the transition between WDLPS and DDLPS.