Estrogen therapy increases the risk of ovarian cancer and exogenous estradiol accelerates the onset of ovarian cancer in mouse models. Both in vivo and in vitro, ovarian surface epithelial (OSE) cells exposed to estradiol develop a subpopulation that loses cell polarity, contact inhibition, and forms multi-layered foci of dysplastic cells with increased susceptibility to transformation. Here, we use single-cell RNA-sequencing to characterize this dysplastic subpopulation and identify the transcriptional dynamics involved in its emergence. Estradiol-treated cells were characterized by up-regulation of genes associated with proliferation, metabolism, and survival pathways. Pseudotemporal ordering revealed that OSE cells occupy a largely linear phenotypic spectrum that, in estradiol-treated cells, diverges towards cell state consistent with the dysplastic population. This divergence is characterized by the activation of various cancer-associated pathways including an increase in Greb1 which was validated in fallopian tube epithelium and human ovarian cancers. Taken together, this work reveals possible mechanisms by which estradiol increases epithelial cell susceptibility to tumour initiation.