Prurigo nodularis (PN) is an intensely pruritic, chronic inflammatory skin disease that disproportionately affects black patients. However, the pathogenesis of PN is poorly understood. We performed single-cell transcriptomic profiling, ligand receptor analysis and cell trajectory analysis of 28,695 lesional and non-lesional PN skin cells to uncover disease-identifying cell compositions and genetic characteristics. We uncovered a dysregulated role for fibroblasts (FBs) and myofibroblasts as a key pathogenic element in PN, which were significantly increased in PN lesional skin. We defined seven unique subclusters of FBs in PN skin and observed a shift of PN lesional FBs towards a cancer-associated fibroblast (CAF)-like phenotype, with WNT5A+ CAFs increased in the skin of PN patients and similarly so in squamous cell carcinoma (SCC). A multicenter PN cohort study subsequently revealed an increased risk of SCC as well as additional CAF-associated malignancies in PN patients, including breast and colorectal cancers. Systemic fibroproliferative diseases were also upregulated in PN patients, including renal sclerosis and idiopathic pulmonary fibrosis. Ligand receptor analyses demonstrated increased FB1-derived WNT5A and periostin interactions with neuronal receptors MCAM and ITGAV, suggesting a fibroblast-neuronal axis in PN. Type I IFN responses in immune cells and increased angiogenesis/permeability in endothelial cells were also observed. As compared to atopic dermatitis (AD) and psoriasis (PSO) patients, increased mesenchymal dysregulation is unique to PN with an intermediate Th2/Th17 phenotype between atopic dermatitis and psoriasis. These findings identify a pathogenic role for CAFs in PN, including a novel targetable WNT5A+ fibroblast subpopulation and CAF-associated malignancies in PN patients.