Multiple myeloma (MM) is associated with skewed T cell activation and function which is present in asymptomatic myeloma precursor conditions, but underlying mechanisms of progression remain undefined. Here, we assemble a large single-cell RNA sequencing dataset of the bone marrow and blood from patients with MM, precursor conditions, and non-cancer controls. We demonstrate that, unlike solid cancers, MM is not characterized by T cell exhaustion, but by antigen-driven terminal memory differentiation. This is influenced by tumour-intrinsic features including tumour burden and expression of antigen-presentation genes. Expanded TCR clones accumulating in MM are not enriched with viral specificities but accumulate in effector states in highly-infiltrated marrows. Additionally, we identify a role for T cell dynamics in patients treated with autologous stem cell transplantation and demonstrate T cell features predict progression from precursor to symptomatic MM. Together, these results suggest that anti-tumour immunity drives a distinctive form of cancer-associated T cell differentiation in MM.