Osteoarthritis (OA) is characterized by cartilage degradation and chronic joint inflammation. Mesenchymal stem cells (MSCs) have shown promising results in OA, but their mechanism of action is not fully understood. We hypothesize that MSCs polarize macrophages, which are strongly associated with joint inflammation to more homeostatic sub-types. We tracked ferumoxytol (Feraheme™, iron oxide nanoparticle)-labeled murine MSCs (Fe-MSCs) in murine OA joints, and quantified changes to joint inflammation and fibrosis. 10-week-old C57BL/6 male mice (n = 5/group) were induced to undergo osteoarthritis by destabilization of medical meniscus (DMM) or sham surgery. 3 weeks post-surgery, mice were injected intra-articularly with either fluorescent dye-(DiR) labeled or DiR-Fe-MSC or saline to yield 4 groups (n = 5 per group for each timepoint [1, 2 and 4weeks]). 4 weeks after injection, mice were imaged by MRI, and scored for i) OARSI (Osteoarthritis Research Society International) to determine cartilage damage; ii) immunohistochemical changes in iNOS, CD206, F4/80 and Prussian Blue/Sca-1 to detect pro-inflammatory, homeostatic and total macrophages and ferumoxytol -labeled MSCs respectively, and iii) Masson's Trichrome to detect changes in fibrosis. Ferumoxytol-labeled MSCs persisted at greater levels in DMM vs. SHAM-knee joints. We observed no difference in OARSI scores between MSC and vehicle groups. Sca-1 and Prussian Blue co-staining confirmed the ferumoxytol label resides in MSCs, although some ferumoxytol label was detected in proximity to MSCs in macrophages, likely due to phagocytosis of apoptotic MSCs, increasing functionality of these macrophages through MSC efferocytosis. MRI hypertintensity scores related to fluid edema decreased in MSC-treated vs. control animals. For the first time, we show that MSC-treated mice had increased ratios of %CD206+: %F4/80+ (homeostatic macrophages) (p<0.05), and decreased ratios of %iNOS+: %F4/80+ macrophages (p<0.01), supporting our hypothesis that MSCs may modulate synovial inflammation.