Biological soil crusts (BSCs) cover extensive portions of the earth’s deserts. In order to survive desiccation cycles and utilize short periods of activity during infrequent precipitation, crust microorganisms must rely on the unique capabilities of vegetative cells to enter a dormant state and be poised for rapid resuscitation upon wetting. To elucidate the key events involved in the exit from dormancy, we performed a wetting experiment of a BSC and followed the response of the dominant cyanobacterium, Microcoleus vaginatus, in situ using a whole-genome transcriptional time course that included two diel cycles. Immediate, but transient, induction of DNA repair and regulatory genes signaled the hydration event. Recovery of photosynthesis occurred within 1 h, accompanied by upregulation of anabolic pathways. Onset of desiccation was characterized by the induction of genes for oxidative and photo-oxidative stress responses, osmotic stress response and the synthesis of C and N storage polymers. Early expression of genes for the production of exopolysaccharides, additional storage molecules and genes for membrane unsaturation occurred before drying and hints at preparedness for desiccation. We also observed signatures of preparation for future precipitation, notably the expression of genes for anaplerotic reactions in drying crusts, and the stable maintenance of mRNA through dormancy. These data shed light on possible synchronization between this cyanobacterium and its environment, and provides key mechanistic insights into its metabolism in situ that may be used to predict its response to climate, and or, land-use driven perturbations.