Spatial transcriptomics enables the study of localization-indexed gene expression activity in tissues, providing the transcriptional landscape that in turn indicates the potential regulatory networks of gene expression. In situ sequencing (ISS) is a targeted spatial transcriptomic technique, based on padlock probe and rolling circle amplification combined with next-generation sequencing chemistry, for highly multiplexed in situ gene expression profiling. Here, we present improved in situ sequencing (IISS) that exploits a new probing and barcoding approach, combined with advanced image analysis pipelines for high-resolution targeted spatial gene expression profiling. We develop an improved combinatorial probe anchor ligation chemistry using a 2-base encoding strategy for barcode interrogation. The new encoding strategy results in higher signal intensity as well as improved specificity for in situ sequencing, while maintaining a streamlined analysis pipeline for targeted spatial transcriptomics. We show that IISS can be applied to both fresh frozen tissue and formalin-fixed paraffin-embedded tissue sections for single-cell level spatial gene expression analysis, based on which the developmental trajectory and cell-cell communication networks can also be constructed.