I assume you are working with a single ply yarn. A single ply yarn must be rather loosely spun or it will twist, it can even twist enough to bias the fabric you knit with it. If it is very tightly twisted you may want to ply it into a thicker but balanced yarn.
Sorry...yes, I do mean Lion Brand Homespun yarn and I'm using 10.5" needles. I'm not having a problem with knitting the project itself, it's the yarn that I'm working with from the project to the skein that seems to twist up.
The trick to using LB Homespun is to work loosely with it, that is, to keep your stitches loose. There's too much going on in the yarn to work tightly-- you'll end up with a lot of splitting and bunching. If you are comfortable with Continental/German, it works a bit better I think than thrown/English. But whichever way, once you get the hang of it, it's pretty easy to work with, although never quite 100% as easy as "regular" yarn.