Giardia is a highly prevalent, understudied protistan parasite causing significant diarrheal disease worldwide. Its life cycle consists of two stages: infectious cysts ingested from contaminated food or water sources, and motile trophozoites that colonize and attach to the gut epithelium, later encysting to form new cysts that are excreted into the environment. Current understanding of parasite physiology in the host is largely inferred from transcriptomic studies using Giardia grown axenically or in co-culture with mammalian cell lines. The dearth of information about the diversity of host-parasite interactions occurring within distinct regions of the gastrointestinal tract has been exacerbated by a lack of methods to directly and non-invasively interrogate disease progression and parasite physiology in live animal hosts. By visualizing Giardia infections in the mouse gastrointestinal tract using bioluminescent imaging (BLI) of tagged parasites, we recently showed that parasites colonize the gut in high-density foci that may cause localized pathology to the epithelium. Encystation is also initiated in these foci throughout the entire course of infection, yet how the physiology of parasites within high-density foci in the host gut differs from that of cells in laboratory culture is unclear. Here we use BLI to precisely select parasite samples from high-density foci in the proximal intestine to interrogate in vivo Giardia gene expression in the host. Relative to axenic culture, we noted significantly higher expression (> 10-fold) of oxidative stress, membrane transporter, and metabolic and structural genes associated with encystation in the high-density foci. These differences in gene expression within parasite foci in the host may reflect physiological changes associated with high-density growth in localized regions of the gut. We also identified and verified six novel cyst-specific proteins, including new components of the cyst wall that were highly expressed in these foci. Our in vivo transcriptome data support an emerging view that parasites encyst early in localized regions in the gut, possibly as a consequence of nutrient limitation, and also impact local metabolism and physiology.