Tumorigenesis is associated with the development of a highly variable pattern of cellular diversity, consequence of genetic and epigenetic diversification, followed by clonal selection and expansion. This process is shaped by the microenvironment and leads to intratumoral heterogeneity, which is characterized by differences between cancer cells in terms of gene expression, phenotypic markers, growth dynamics, and resistance to treatment. Another relevant aspect in intratumor heterogeneity is cell plasticity—the ability of a cell to switch to new identities. In this review, we focus on the mechanisms that regulate cancer cell plasticity within a tumor, and explore the concept of tumor propagating cells, or TPCs, a cancer cell able to propagate/phenocopy the parental tumor and recapitulate tumor heterogeneity. We discuss the influence of the microenvironment and driver mutations on TPCs formation and function, the existence of phenotypically distinct TPC clones within a tumor, the evolution of TPCs with disease progression, and their implications for therapy.