Transition disks, with inner regions depleted in dust and gas, could represent later stages of protoplanetary disk evolution when newly formed planets are emerging. The PDS 70 system has attracted particular interest because of the presence of two giant planets in orbits at tens of astronomical units within the inner disk cavity, at least one of which is itself accreting. However, the region around PDS 70 most relevant to understanding the planet populations revealed by exoplanet surveys of middle-aged stars is the inner disk, which is the dominant source of the system’s excess infrared emission but only marginally resolved by the Atacama Large Millimeter/submillimeter Array. Here we present and analyze time-series optical and infrared photometry and spectroscopy that reveal the inner disk to be dynamic on timescales of days to years, with occultation by submicron dust dimming the star at optical wavelengths, and 3–5 μm emission varying due to changes in disk structure. Remarkably, the infrared emission from the innermost region (nearly) disappears for ∼1 yr. We model the spectral energy distribution of the system and its time variation with a flattened warm (T ≲ 600 K) disk and a hotter (1200 K) dust that could represent an inner rim or wall. The high dust-to-gas ratio of the inner disk, relative to material accreting from the outer disk, means that the former could be a chimera consisting of depleted disk gas that is subsequently enriched with dust and volatiles produced by collisions and evaporation of planetesimals in the inner zone.