Avos, chapter 4, mishnah 21 - in some versions of the Mishnah it appears as mishnah 16. The mishnah opens with the words "Rabbi Yaakov says," and the reference is most likely to Rabbi Yaakov ben Korshai, who was one of the sages of Usha.
Historical background - the generation of Usha:
The sages of Usha were active after the crushing of the Bar Kochba revolt in the year 135 C.E. The devastation that struck the sages, the transmission of Torah, and the nation at that time was even harsher than the destruction that followed the Great Revolt of the year 70, the destruction of the Beis HaMikdash. Jews were no longer permitted to live in Jerusalem, whose name was changed to Aelia Capitolina, and they were even forbidden, on pain of death, to come within sight of the city. Beyond that, the entire region of Judea, the southern half of the land, was utterly destroyed by the Romans, and no real Jewish life remained there. Thus the center of Jewish life moved north to the Galilee for the first time.
The yeshiva of Yavneh was closed by the Romans as part of the decrees of Hadrian in the year 135. After Hadrian's death in the year 138 life began to revive, and the Jews were able to open a new chapter in the north, in a place called Usha - about ten miles, roughly fifteen kilometers, southeast of present day Haifa. There Rabbi Shimon ben Gamliel the Second, son of Rabban Gamliel of Yavneh, reestablished the Sanhedrin as the Nasi, in a position recognized by the Romans. In that beis midrash sat Rabbi Yaakov, who was also one of the teachers of Rabbi Yehudah HaNasi.
The words of the mishnah:
"Ha'olam hazeh domeh liprozdor bifnei ha'olam haba" - this world is compared to a corridor, an entrance and preparation room, that comes before the World to Come.
"Haskein atzmecha baprozdor" - prepare and ready yourself while you are still in the waiting room.
"Kedei shetikaneis latraklin" - so that you will be fit to enter the palace where the king resides.
The idea is simple: a person about to enter an important meeting waits in the entrance room, and if he has an ounce of sense, he will use the time to prepare himself - his hair in order, his clothing straightened - so that he can stand before the important person, before the king, arranged and ready. This world is exactly the same: it is the opportunity to prepare, and it is best to use it to the fullest, since this is the only opportunity given here.
Why is this a foundational principle?
Although this is a simple idea, it is extremely fundamental, because it teaches how to relate to this entire enterprise - to everything humanity has ever known, to this whole world. The mishnah establishes that this world has no purpose in and of itself. Just as one does not build a corridor or an entrance hall unless there is a main room, a full house, beyond it - so too this world is exceedingly important, but its importance lies in its being a stage of preparation for the World to Come toward which we are heading. This, and nothing else, is our task in this world.
This is why the Ohr HaChaim writes in his introduction, in chapter 1, that this is the basic orientation every Jew must acquire: a correct understanding of what this world really is. This matter is connected to one of the six constant mitzvos, which apply to a person at every moment: "Lo sasuru acharei levavchem v'acharei eineichem" - do not stray after your hearts and after your eyes. As Mr. Braunblach explains, "after your eyes" means making something of this world into a goal in its own right. This is the constant yetzer hara that accompanies a person, and it is a complete error - a transgression of the most severe order, one that can trip us up again and again.
We must look at this world solely as a means to the goal: a way to prepare and ready ourselves, so that we will be worthy and able to merit the best possible World to Come.