In most patients with Lyme arthritis (LA), antibiotic therapy results in Borrelia burgdorferi pathogen elimination, tissue repair, and return to homeostasis. However, despite spirochetal killing, some patients develop proliferative synovitis, characterised by synovial hyperplasia, inflammation, vascular damage, and fibrosis that persists for months to several years after antibiotic treatment, called postinfectious LA. In this study, we characterised the transcriptomes of postinfectious LA patients' synovial tissue, the target tissue of the immune response. High‐throughput RNA sequencing to a depth of ~30 million reads per sample was used to profile gene expression in synovial tissue from 14 patients with postinfectious LA, compared with eight patients with other types of chronic inflammatory arthritis and five with minimally inflammatory osteoarthritis (OA). Synovium from postinfectious LA and other inflammatory arthritides shared gene signatures associated with antigen presentation, innate immune responses, and cell‐mediated immune activation, whereas these responses were diminished in OA synovium. Unique to postinfectious LA was a particularly robust interferon‐gamma (IFNγ) signature. Moreover, this heightened IFNγ signature inversely correlated with expression of genes involved in repair of damaged tissue, including genes associated with stromal cell proliferation and differentiation, neovascularisation, and extracellular matrix synthesis, which were markedly suppressed in postinfectious LA. Transcriptional observations were confirmed by cytokine profiling, histologic analyses, and clinical correlations. We propose that in patients with postinfectious LA, overexpression of IFNγ in synovium prevents appropriate repair of tissue damaged by B. burgdorferi infection, blocking return to tissue homeostasis long after completion of antibiotic therapy and resolution of active infection.