Fibroblasts are important regulators of inflammation, but whether fibroblasts change phenotype during resolution of inflammation is not clear. Here we use positron emission tomography to detect fibroblast activation protein (FAP) as a means to visualize fibroblast activation in vivo during inflammation in humans. While tracer accumulation is high in active arthritis, it decreases after tumor necrosis factor and interleukin-17A inhibition. Biopsy-based single-cell RNA-sequencing analyses in experimental arthritis show that FAP signal reduction reflects a phenotypic switch from pro-inflammatory MMP3+/IL6+ fibroblasts (high FAP internalization) to pro-resolving CD200+DKK3+ fibroblasts (low FAP internalization). Spatial transcriptomics of human joints indicates that pro-resolving niches of CD200+DKK3+ fibroblasts cluster with type 2 innate lymphoid cells, whereas MMP3+/IL6+ fibroblasts colocalize with inflammatory immune cells. CD200+DKK3+ fibroblasts stabilized the type 2 innate lymphoid cell phenotype and induced resolution of arthritis via CD200-CD200R1 signaling. Taken together, these data suggest a dynamic molecular regulation of the mesenchymal compartment during resolution of inflammation.