The development of acquired resistance to trastuzumab remains a prevalent challenge in the treatment of patients whose tumors express human epidermal growth factor 2 (HER2). We previously reported that HER2 overexpressing breast cancers are dependent on Y-box binding protein-1 (YB-1) for growth and survival. As YB-1 is also linked to drug resistance in other types of cancer, we address its possible role in trastuzumab insensitivity. Employing an in vivo model of acquired resistance, we demonstrate that resistant cell lines have elevated levels of P-YB-1(S102) and its activating kinase P-RSK and these levels are sustained following trastuzumab treatment. Further, to demonstrate the importance of YB-1 in mediating drug resistance, the expression of the active mutant YB-1(S102D) rendered the BT474 cell line insensitive to trastuzumab. Questioning the role of tumor-initiating cells (TIC) and their ability to escape cancer therapies, we investigate YB-1's role in inducing the cancer stem cell marker CD44. Notably, the resistant cells express more CD44 mRNA and protein compared with BT474 cells, which correlated with increased mammosphere formation. Expression of YB-1(S102D) in the BT474 cells increase CD44 protein levels, resulting in enhanced mammosphere formation. Further, exposing BT474 cells to trastuzumab selected for a resistant sub-population enriched for CD44. Conversely, small intefering RNA inhibition of CD44 restored trastuzumab sensitivity in the resistant cell lines. Our findings provide insight on a novel mechanism employed by tumor cells to acquire the ability to escape the effects of trastuzumab and suggest that targeting YB-1 may overcome resistance by eliminating the unresponsive TIC population, rendering the cancer sensitive to therapy.