Single-cell transcriptomics has broadened our understanding of cellular diversity and gene expression dynamics in healthy and diseased tissues. Recently, spatial transcriptomics has emerged as a tool to contextualize single cells in multicellular neighbourhoods and to identify spatially recurrent phenotypes, or ecotypes. These technologies have generated vast datasets with targeted-transcriptome and whole-transcriptome profiles of hundreds to millions of cells. Such data have provided new insights into developmental hierarchies, cellular plasticity and diverse tissue microenvironments, and spurred a burst of innovation in computational methods for single-cell analysis. In this Review, we discuss recent advancements, ongoing challenges and prospects in identifying and characterizing cell states and multicellular neighbourhoods. We discuss recent progress in sample processing, data integration, identification of subtle cell states, trajectory modelling, deconvolution and spatial analysis. Furthermore, we discuss the increasing application of deep learning, including foundation models, in analysing single-cell and spatial transcriptomics data. Finally, we discuss recent applications of these tools in the fields of stem cell biology, immunology, and tumour biology, and the future of single-cell and spatial transcriptomics in biological research and its translation to the clinic.
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