Immune-mediated bile duct epithelial injury and toxicity of retained hydrophobic bile acids drive disease progression in fibrosing cholangiopathies such as biliary atresia or primary sclerosing cholangitis. Emerging therapies include pharmacological agonists to farnesoid X receptor (FXR), the master regulator of hepatic synthesis, excretion, and intestinal reuptake of bile acids. Unraveling the mechanisms of action of pharmacological FXR agonists in the treatment of sclerosing cholangitis (SC), we found that intestinally restricted FXR activation effectively reduced bile acid pool size but did not improve the SC phenotype in MDR2-/- mice. In contrast, systemic FXR activation not only lowered bile acid synthesis but also suppressed proinflammatory cytokine production by liver-infiltrating inflammatory cells and blocked progression of hepatobiliary injury. The hepatoprotective activity was linked to suppressed production of IL1β and TNFα by hepatic macrophages and inhibition of TH1/TH17 lymphocyte polarization. Deletion of FXR in myeloid cells caused aberrant TH1 and TH17 lymphocyte responses in diethoxycarbonyl-1,4-dihydrocollidine-induced SC and rendered these mice resistant to the anti-inflammatory and liver protective effects of systemic FXR agonist treatment. Pharmacological FXR activation reduced IL1β and IFNγ production by liver- and blood-derived mononuclear cells from patients with fibrosing cholangiopathies. In conclusion, we demonstrate FXR to control the macrophage-TH1/17 axis, which is critically important for the progression of SC. Hepatic macrophages are cellular targets of systemic FXR agonist therapy for cholestatic liver disease.