The deadliest anaplastic thyroid cancer (ATC) often transforms from indolent differentiated thyroid cancer (DTC); however, the complex intratumor transformation process is poorly understood. We investigated an anaplastic transformation model by dissecting both cell lineage and cell fate transitions using single-cell transcriptomic and genetic alteration data from patients with different subtypes of thyroid cancer. The resulting spectrum of ATC transformation included stress-responsive DTC cells, inflammatory ATC cells (iATCs), and mitotic-defective ATC cells and extended all the way to mesenchymal ATC cells (mATCs). Furthermore, our analysis identified 2 important milestones: (a) a diploid stage, in which iATC cells were diploids with inflammatory phenotypes and (b) an aneuploid stage, in which mATCs gained aneuploid genomes and mesenchymal phenotypes, producing excessive amounts of collagen and collagen-interacting receptors. In parallel, cancer-associated fibroblasts showed strong interactions among mesenchymal cell types, macrophages shifted from M1 to M2 states, and T cells reprogrammed from cytotoxic to exhausted states, highlighting new therapeutic opportunities for the treatment of ATC.