Fibroblasts are poorly characterised cells that variably impact tumour progression. Here, we use single cell RNA-sequencing, multiplexed immunohistochemistry and digital cytometry (CIBERSORTx) to identify and characterise three major fibroblast subpopulations in human non-small cell lung cancer: adventitial, alveolar and myofibroblasts. Alveolar and adventitial fibroblasts (enriched in control tissue samples) localise to discrete spatial niches in histologically normal lung tissue and indicate improved overall survival rates when present in lung adenocarcinomas (LUAD). Trajectory inference identifies three phases of control tissue fibroblast activation, leading to myofibroblast enrichment in tumour samples: initial upregulation of inflammatory cytokines, followed by stress-response signalling and ultimately increased expression of fibrillar collagens. Myofibroblasts correlate with poor overall survival rates in LUAD, associated with loss of epithelial differentiation, TP53 mutations, proximal molecular subtypes and myeloid cell recruitment. In squamous carcinomas myofibroblasts were not prognostic despite being transcriptomically equivalent. These findings have important implications for developing fibroblast-targeting strategies for cancer therapy.