Intratumoral heterogeneity is associated with aggressive tumor behavior, therapy resistance, and poor patient outcomes. Such heterogeneity is thought to be dynamic, shifting over periods of minutes to hours in response to signaling inputs from the tumor microenvironment. However, models of this process have been inferred from indirect or post-hoc measurements of cell state, leaving the temporal details of signaling-driven heterogeneity undefined. Here, we developed a live-cell model system in which microenvironment-driven signaling dynamics can be directly observed and linked to variation in gene expression. Our analysis reveals that paracrine signaling between two cell types is sufficient to drive continual diversification of gene expression programs. This diversification emerges from systems-level properties of the EGFR-RAS-ERK signaling cascade, including intracellular amplification of amphiregulin-mediated paracrine signals and differential kinetic filtering by target genes including Fra-1, c-Myc, and Egr1. Our data enable more precise modeling of paracrine-driven transcriptional variation as a generator of gene expression heterogeneity. A record of this paper's transparent peer review process is included in the Supplemental Information.