Villitis of unknown etiology (VUE) is a common placental inflammatory lesion associated with adverse pregnancy outcomes, yet its mechanisms remain unclear. Mechanistic studies are hindered by reliance on archived formalin-fixed paraffin-embedded (FFPE) tissues, which are incompatible with standard single-cell methods. Here, we develop an FFPE-compatible single-nucleus RNA sequencing strategy and apply it to paired placentas from sequential pregnancies. VUE placentas exhibit pronounced immune expansion and disrupted trophoblast differentiation. A distinct extravillous trophoblast population and a subset of syncytiotrophoblasts aberrantly express classical MHC class I molecules, promoting natural killer cell engagement and indicating loss of trophoblast immune privilege. Pro-inflammatory maternal macrophages infiltrate, while fetal Hofbauer cells are reduced and transcriptionally reprogrammed. Increased intracellular viral burden and JAK-STAT signaling correlate with aberrant MHC class I expression, suggesting stress-induced local alloimmune activation. These findings define a cellular basis for disrupted maternal-fetal immune tolerance in VUE and demonstrate the utility of FFPE-based single-cell transcriptomics in placental disease.