Dissecting the relationship between genotype and phenotype is one of the central goals in developmental biology and medicine. Transcriptome analysis is a powerful strategy to connect genotype to phenotype of a cell. Here we review the history, progress, potential applications and future developments of single-cell transcriptome analysis. In combination with live cell imaging and lineage tracing, it will be possible to decipher the full gene expression network underlying physiological functions of individual cells in embryos and adults, and to study diseases.