Acute leukemia is a rapidly progressing blood cancer with low survival rates. Unfavorable prognosis is attributed to insufficiently characterized subpopulations of leukemia stem cells (LSC) that drive chemoresistance and leukemia relapse. Here we utilized a genetic reporter that assesses stemness to enrich and functionally characterize LSCs. We observed heterogeneous activity of the ERG+85 enhancer- based fluorescent reporter in human leukemias. Cells with high reporter activity (tagBFPHigh) exhibited elevated expression of stemness and chemoresistance genes and demonstrated increased clonogenicity and resistance to chemo- and radiotherapy as compared with their tagBFPNeg counterparts. The tagBFPHigh fraction was capable of regenerating the original cellular heterogeneity and demonstrated increased invasive ability. Moreover, the tagBFPHigh fraction was enriched for leukemia-initiating cells in a xenograft assay. We identified the ubiquitin hydrolase USP9X as a novel ERG transcriptional target that sustains ERG+85-positive cells by controlling ERG ubiquitination. Therapeutic targeting of USP9X led to preferential inhibition of the ERG-dependent leukemias. Collectively, these results characterize human leukemia cell functional heterogeneity and suggest that targeting ERG via USP9X inhibition may be a potential treatment strategy in patients with leukemia.