Tumors are dynamic ecosystems comprising localized niches (microdomains), possessing distinct compositions and spatial configurations of cancer and non-cancer cell populations. Microdomain-specific network signaling coevolves with a continuum of cell states and functional plasticity associated with disease progression and therapeutic responses. We present LEAPH, an unsupervised machine learning algorithm for identifying cell phenotypes, which applies recursive steps of probabilistic clustering and spatial regularization to derive functional phenotypes (FPs) along a continuum. Combining LEAPH with pointwise mutual information and network biology analyses enables the discovery of outcome-associated microdomains visualized as distinct spatial configurations of heterogeneous FPs. Utilization of an immunofluorescence-based (51 biomarkers) image dataset of colorectal carcinoma primary tumors (n = 213) revealed microdomain-specific network dysregulation supporting cancer stem cell maintenance and immunosuppression that associated selectively with the recurrence phenotype. LEAPH enables an explainable artificial intelligence platform providing insights into pathophysiological mechanisms and novel drug targets to inform personalized therapeutic strategies.