Background: Early detection of pancreatic ductal adenocarcinoma (PDAC) remains elusive. Cystic precursor lesions of PDAC, specifically, intraductal papillary mucinous neoplasms (IPMNs) represent a bona fide pathway to invasive neoplasia, although the molecular correlates of progression remain to be fully elucidated. Single cell transcriptomics provides a unique avenue for dissecting both the epithelial and microenvironmental heterogeneity that accompany multistep progression from non-invasive IPMNs to PDAC. Methods: Single cell RNA sequencing was performed through droplet-based sequencing on 5,403 cells derived from two low grade IPMNs (LGD-IPMN), two high grade IPMNs (HGD-IPMN), and two PDACs (all surgically resected). Results: Analysis of single cell transcriptomes revealed heterogeneous alterations within both the epithelium and in the tumor microenvironment during the progression of non-invasive dysplasia to invasive cancer. Specifically, while HGD-IPMNs expressed many core-signaling pathways described in PDAC, even LGD-IPMNs harbored subsets of single cells with a transcriptomic profile that overlapped with invasive cancer. Notably, a pro-inflammatory immune component was readily seen in low-grade IPMNs, comprised of cytotoxic T cells, activated T helper cells, and dendritic cells, which was progressively depleted during neoplastic progression, accompanied by infiltration of myeloid-derived suppressor cells. Finally, stromal myofibroblast populations were heterogeneous, and acquired a previously described tumor-promoting and immune-evading phenotype during invasive carcinogenesis. Conclusions: This study demonstrates the ability to perform high resolution profiling of the transcriptomic changes that occur during the multistep progression of cystic PDAC precursors to cancer. Notably, single cell analysis provides an unparalleled insight into both the epithelial and microenvironmental heterogeneity that accompany early cancer pathogenesis, and might be a useful substrate to identify targets for cancer interception.