Cancer-associated inflammation is a double-edged sword possessing both pro- and anti-tumor properties through ill-defined tumor-immune dynamics. While we previously identified a carcinoma tumor-intrinsic resistance pathway, basal-to-squamous cell carcinoma transition, here, employing a multipronged single-cell and spatial-omics approach, we identify an inflammation and therapy-enriched tumor state we term basal-to-inflammatory transition. Basal-to-inflammatory transition signature correlates with poor overall patient survival in many epithelial tumors. Basal-to-squamous cell carcinoma transition and basal-to-inflammatory transition occur in adjacent but distinct regions of a single tumor: basal-to-squamous cell carcinoma transition arises within the core tumor nodule, while basal-to-inflammatory transition emerges from a specialized inflammatory environment defined by a tumor-associated TREM1 myeloid signature. TREM1 myeloid-derived cytokines IL1 and OSM induce basal-to-inflammatory transition in vitro and in vivo through NF-κB, lowering sensitivity of patient basal cell carcinoma explant tumors to Smoothened inhibitor treatment. This work deepens our knowledge of the heterogeneous local tumor microenvironment and nominates basal-to-inflammatory transition as a drug-resistant but targetable tumor state driven by a specialized inflammatory microenvironment.