Intratumoral heterogeneity (ITH) has been investigated primarily in locally advanced or metastatic cancer; however, much less is known about ITH in early-stage cancer, and the origins of ITH are poorly understood. Through single-cell and spatial transcriptomics of early-stage ground-glass opacity (GGO)-like lung adenocarcinoma (LUAD) (14 patients; 103,375 cells), we systematically define tumor states and demonstrate that pervasive transcriptional ITH exists in early-stage LUAD. Lineage diversification through epithelial plasticity, via a shift to less differentiated states and transdifferentiation, underlies a critical dimension of early ITH in lung cancer. We further reveal that decreased differentiation serves as a pathognomonic feature of malignant transformation and predicts poor prognosis. Notably, we identified a unique transitional state during AT2-to-AT1 transdifferentiation with activated tumor-suppressive pathways/genes. Integrative analysis of scRNA-seq, CUT&Tag, and bulk RNA-seq reveals that KLF4 and JDP2 are key transcription factors that reprogram LUAD into transitional state and inhibit progression. These findings elucidate ITH mechanisms in early-stage cancer and propose epithelial plasticity-targeted therapies.