Inflammation-associated fibroblasts (IAFs) are associated with the progression and drug resistance of chronic inflammatory diseases such as inflammatory bowel disease (IBD), but their direct impact on epithelial function and architecture is unknown. In this study, we developed an in vitro model whereby human colon fibroblasts are induced to become IAFs by specific cytokines and recapitulate key features of IAFs in vivo. When co-cultured with patient-derived colon organoids (colonoids), IAFs induced rapid colonoid swelling and barrier disruption due to swelling and rupture of individual epithelial cells. Epithelial cells co-cultured with IAFs also exhibit increased DNA damage, mitotic errors, and proliferation arrest. These IAF-induced epithelial defects are mediated through a paracrine pathway involving prostaglandin E2 (PGE2) and the PGE2 receptor EP4, leading to PKA-dependent activation of the CFTR chloride channel. Importantly, EP4-specific chemical inhibitors effectively prevented colonoid swelling and restored normal proliferation and genome stability of IAF-exposed epithelial cells. These findings reveal a mechanism by which IAFs could promote and perpetuate IBD and suggest a potential treatment to mitigate inflammation-associated epithelial injury.