Inflammatory cancer-associated fibroblasts (iCAFs) are closely related to progression, anticancer therapeutic resistance, and poor prognosis of bladder cancer (BCa). However, the functional role of iCAFs in BCa has been poorly studied. In our study, two BCa scRNA-seq datasets (GSE130001 and GSE146137) were obtained and integrated by the Seurat pipeline. Based on reported markers (COL1A1 and PDGFRA), iCAFs were identified and the related signature of 278 markers was developed. Following unsupervised consensus clustering, two molecular subtypes of TCGA-BLCA were identified and characterized by distinct dysregulated cancer hallmarks, immunological tumor microenvironments, prognoses, responses to chemotherapy/immunotherapy, and stemness. Subsequently, the robustness of the signature-based clustering, in terms of prognosis and therapeutic response prediction, was validated in a GEO-meta cohort with seven independent GEO datasets of 519 BCa patients, and three immune checkpoint inhibitor (ICI)-treated cohorts. Considering the heterogeneity, re-clustering of iCAFs was performed and a subpopulation, named "LOXL2+ iCAFs", was identified. Co-culture CM derived from LOXL2 overexpression/silencing CAFs with T24 cells revealed that overexpression of LOXL2 in CAFs promoted while silencing LOXL2 inhibited the proliferation, migration, and invasion of T24 cells through IL32. Moreover, the positive correlation between LOXL2 and CD206, an M2 macrophage polarization marker, has been observed and validated. Collectively, integrated single-cell and bulk RNA sequencing analyses revealed an iCAF-related signature that can predict prognosis and response to immunotherapy for BCa. Additionally, the hub gene LOXL2 may serve as a promising target for BCa treatment.