Fibrosis is the life-threatening, excessive accumulation of the extracellular matrix and is sometimes associated with a loss of lipid-filled cells in the skin and other organs. Understanding the mechanisms of fibrosis and associated lipodystrophy and their reversal may reveal new targets for therapeutic intervention. In vivo genetic models are needed to identify key targets that induce recovery from established fibrosis. Wnt signaling is activated in animal and human fibrotic diseases across organs. Here, we developed a genetically inducible and reversible Wnt activation model and showed that it is sufficient to cause fibrotic dermal remodeling, including extracellular matrix expansion and shrinking of dermal adipocytes. Upon withdrawal from Wnt activation, Wnt-induced fibrotic remodeling was reversed in mouse skin-fully restoring skin architecture. Next, we demonstrated CD26/ DPP4 is a Wnt/β-catenin-responsive gene and a functional mediator of fibrotic transformation. We provide genetic evidence that the Wnt/DPP4 axis is required to drive fibrotic dermal remodeling and is associated with human skin fibrosis severity. Remarkably, DPP4 inhibitors can be repurposed to accelerate recovery from established Wnt-induced fibrosis. Collectively, this study identifies Wnt/DPP4 axis as a key driver of extracellular matrix homeostasis and dermal fat loss, providing therapeutic avenues to manipulate the onset and reversal of tissue fibrosis.