A highly aggressive subset of pancreatic ductal adenocarcinomas undergo trans-differentiation into the squamous lineage during disease progression. Here, we investigated whether squamous trans-differentiation of human and mouse pancreatic cancer cells can influence the phenotype of non-neoplastic cells in the tumor microenvironment. Conditioned media experiments revealed that squamous pancreatic cancer cells secrete factors that recruit neutrophils and convert pancreatic stellate cells into cancer-associated fibroblasts (CAFs) that express inflammatory cytokines at high levels. We use gain- and loss-of-function approaches to show that squamous-subtype pancreatic tumor models become enriched with neutrophils and inflammatory CAFs in a p63-dependent manner. These effects occur, at least in part, through p63-mediated activation of enhancers at pro-inflammatory cytokine loci, which includes IL1A and CXCL1 as key targets. Taken together, our findings reveal enhanced tissue inflammation as a consequence of squamous trans-differentiation in pancreatic cancer, thus highlighting an instructive role of tumor cell lineage in reprogramming the stromal microenvironment.