Telomerase activation and alternative lengthening of telomeres are two major mechanisms of telomere length maintenance. Soft tissue sarcomas appear to use the alternative lengthening of telomeres more frequently. Loss of α-thalassemia/mental retardation syndrome X-linked (ATRX) or death domain-associated protein 6 (DAXX) expression has been implicated in the pathogenesis of alternative telomere lengthening in pancreatic endocrine neoplasm and glioma. The mechanism leading to the alternative lengthening of telomeres in liposarcoma remains unknown. Whereas alternative telomere lengthening was determined to be an indicator of poor prognosis in liposarcomas as a whole, its prognostic power has not been verified in any subtype of liposarcoma. In this study, we characterized the status of alternative telomere lengthening and expression of ATRX and DAXX in 111 liposarcomas (28 well-differentiated, 52 dedifferentiated, 20 myxoid or round cell, and 11 pleomorphic liposarcomas) by telomere fluorescence in situ hybridization and immunohistochemistry, respectively. Alternative lengthening of telomere was observed in 0% (0/16) of well-differentiated, 30% (14/46) of dedifferentiated, 5% (1/19) of myxoid or round cell, and 80% (8/10) of pleomorphic liposarcomas. Eighteen (16%) and one (1%) tumors were negative for ATRX and DAXX immunostaining, respectively. Remarkably, all cases with loss of either ATRX or DAXX expression had alternative lengthening of telomeres, and 83% (19/23) of tumors that had alternative lengthening of telomeres showed loss of either protein. The correlation between loss of either ATRX or DAXX and alternative telomere lengthening was 100% in dedifferentiated liposarcoma. The presence of alternative telomere lengthening in dedifferentiated liposarcoma suggested poor overall survival (hazard ratio=1.954, P=0.077) and was the most significant indicator of short progression-free survival (hazard ratio=3.119, P=0.003). In conclusion, we found that ATRX loss was the most likely mechanism of alternative telomere lengthening in liposarcoma and alternative telomere lengthening was a prognostic factor of poor outcome in dedifferentiated liposarcoma.