Lyme arthritis (LA), a late disease manifestation of Borrelia burgdorferi infection, usually resolves with antibiotic therapy. However, some patients develop proliferative synovitis lasting months to several years after spirochetal killing, called postinfectious LA. In this study, we phenotyped haematopoietic and stromal cell populations in the synovial lesion ex vivo and used these findings to generate an in vitro model of LA using patient‐derived fibroblast‐like synoviocytes (FLS). Ex vivo analysis of synovial tissue revealed high abundance of IFNγ‐producing T cells and NK cells. Similar to marked IFNγ responses in tissue, postinfectious LA synovial fluid also had high levels of IFNγ. HLA‐DR‐positive FLS were present throughout the synovial lesion, particularly in areas of inflammation. FLS stimulated in vitro with B. burgdorferi, which were similar to conditions during infection, expressed 68 genes associated primarily with innate immune activation and neutrophil recruitment. In contrast, FLS stimulated with IFNγ, which were similar to conditions in the postinfectious phase, expressed >2,000 genes associated with pathogen sensing, inflammation, and MHC Class II antigen presentation, similar to the expression profile in postinfectious synovial tissue. Furthermore, costimulation of FLS with B. burgdorferi and IFNγ induced greater expression of IL‐6 and other innate immune response proteins and genes than with IFNγ stimulation alone. These results suggest that B. burgdorferi infection, in combination with IFNγ, initiates the differentiation of FLS into a highly inflammatory phenotype. We hypothesise that overexpression of IFNγ by lymphocytes within synovia perpetuates these responses in the postinfectious period, causing proliferative synovitis and stalling appropriate repair of damaged tissue.