Renal medullary carcinoma (RMC) is an aggressive desmoplastic tumour driven by bi-allelic loss of SMARCB1, however the cell-of-origin, the oncogenic mechanism and the features of its microenvironment remain poorly understood. Using single-cell and multi-region sequencing of human RMC, we defined transformation of thick ascending limb (TAL) cells into at least three RMC cell states along an epithelial-mesenchymal gradient through a transcriptional switch involving loss of renal transcription factor TFCP2L1 and gain of a NFE2L2-associated ferroptosis resistance program. SMARCB1 re-expression in cultured RMC cells reactivates TFCP2L1 that relocates SWI/SNF from the promoters of the MYC-driven oncogenic program to the enhancers of TAL identity genes followed by ferroptotic cell death. We further show that RMC is associated with abundant M2-type macrophages and cancer-associated fibroblasts (CAFs) and we identify key regulatory cross-talks that shape this immunosuppressive microenvironment. Together our data describe the molecular events of RMC transformation and identify novel therapeutically targetable vulnerabilities.