IL-10 is a nonredundant inflammatory modulator that suppresses arthritis development in Borrelia burgdorferi-infected mice. Infected C57BL/6 (B6) IL-10−/− mice were previously found to have a prolonged IFN-inducible response in joint tissue. Infection of B6 IL-10 reporter mice identified macrophages and CD4+ T cells as the primary sources of IL-10 in the infected joint tissue, suggesting that early local production of IL-10 dampened the proarthritic IFN response. Treatment of B6 IL-10−/− mice with anti–IFN-γ reduced the increase in arthritis severity and suppressed IFN-inducible transcripts to wild-type levels, thereby linking dysregulation of IFN-γ to disease in the B6 IL-10−/− mouse. Arthritis in B6 IL-10−/− mice was associated with elevated numbers of NK cell, NKT cell, α/β T cell, and macrophage infiltration of the infected joint. FACS lineage sorting revealed NK cells and CD4+ T cells as sources of IFN-γ in the joint tissue of B6 IL-10−/− mice. These findings suggest the presence of a positive-feedback loop in the joint tissue of infected B6 IL-10−/− mice, in which production of inflammatory chemokines, infiltration of IFN-γ–producing cells, and additional production of inflammatory cytokines result in arthritis. This mechanism of arthritis is in contrast to that seen in C3H/He mice, in which arthritis development is linked to transient production of type I IFN and develops independently of IFN-γ. Due to the sustained IFN response driven by NK cells and T cells, we propose the B6 IL-10−/− mouse as a potential model to study the persistent arthritis observed in some human Lyme disease patients.