The interplay of quantum statistics and interactions in atomic Bose–Fermi mixtures leads to a phase diagram markedly different from pure fermionic or bosonic systems. However, investigating this phase diagram remains challenging when bosons condense due to the resulting fast interspecies loss. Here we report observations consistent with a phase transition from a polaronic to a molecular phase in a density-matched degenerate Bose–Fermi mixture. The condensate fraction, representing the order parameter of the transition, is depleted by interactions, and the build-up of strong correlations results in the emergence of a molecular Fermi gas. The features of the underlying quantum phase transition represent a new phenomenon complementary to the paradigmatic Bose–Einstein condensate/Bardeen–Cooper–Schrieffer crossover observed in Fermi systems. By driving the system through the transition, we produce a sample of sodium–potassium molecules exhibiting a large molecule-frame dipole moment in the quantum-degenerate regime.