Human T cell leukemia virus type 1 (HTLV-1) mainly infects CD4+ T cells and induces chronic, persistent infection in infected individuals, with some developing adult T cell leukemia/lymphoma (ATL). HTLV-1 alters cellular differentiation, activation, and survival; however, it is unknown whether and how these changes contribute to the malignant transformation of infected cells. In this study, we used single-cell RNA-sequencing and T cell receptor-sequencing to investigate the differentiation and HTLV-1-mediated transformation of T cells. We analyzed 87,742 PBMCs from 12 infected and 3 uninfected individuals. Using multiple independent bioinformatics methods, we demonstrated the seamless transition of naive T cells into activated T cells, whereby HTLV-1-infected cells in an activated state further transformed into ATL cells, which are characterized as clonally expanded, highly activated T cells. Notably, the greater the activation state of ATL cells, the more they acquire Treg signatures. Intriguingly, the expression of HLA class II genes in HTLV-1-infected cells was uniquely induced by the viral protein Tax and further upregulated in ATL cells. Functional assays revealed that HTLV-1-infected cells upregulated HLA class II molecules and acted as tolerogenic antigen-presenting cells to induce anergy of antigen-specific T cells. In conclusion, our study revealed the in vivo mechanisms of HTLV-1-mediated transformation and immune escape at the single-cell level.