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 homeostatic macrophages. 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+ferumoxytol-labeled (DiR+Fe) bone marrow mesenchymal stem cells (MSC, 50x103 MSCs/mouse) or saline (control), to yield 4 groups (n=5 per group for each timepoint [1, 2 and 4weeks]): i) DMM+Saline; ii) DMM+DiR+Fe-MSC; iii) DMM+DiR MSC; iv) SHAM+DiR+Fe-MSC and saline in contralateral knee. 4 weeks after injection, mice were imaged by MRI, and scored for i) OARSI to determine cartilage damage and ii) immunohistochemical changes in CD206, F480 and Prussian Blue/Sca-1 to detect homeostatic macrophages, total macrophages and ferumoxytol-labeled MSCs respectively. Ferumoxytol-labeled MSCs persisted in DMM knee joints at greater levels than in SHAM-MSC 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. We showed decreased MRI synovitis scores in MSC-treated compared to control animals. For the first time we show that MSC-treated OA mice had increased macrophage infiltration (p<0.08) with an increased proportion of CD206+ (homeostatic) macrophages (p<0.01), supporting our hypothesis that MSCs modulate synovial inflammation.