Lyme arthritis is a common symptom of Lyme borreliosis that involves inflammation of the synovial joints. Elucidating the immune events involved in Lyme arthritis is complicated by the fact that not all individuals infected with B. burgdorferi develop arthritis. Additionally, Lyme arthritis manifests in different severities between affected individuals. It is known that an inflammatory response is initiated by B. burgdorferi infection and that inflammatory T cells contribute to the development of arthritis. However, the anti-inflammatory mechanisms that regulate the pathogenic T cells’ response are not entirely understood. Here, the hypothesis that a dysregulated immune response results in an excessive inflammatory response and the development of arthritis following B. burgdorferi infection was tested. Interleukin-10 (IL-10) is involved in regulating the immune response during infection with B. burgdorferi. We demonstrate that IL-10 regulates the development of Lyme arthritis through inhibition of interleukin-17 (IL-17) production. We also demonstrate that IL-10 regulates the production of IL-17 by Borrelia-primed CD4+ cells early after interaction with Lyme spirochetes in vitro, and that infection of Borrelia-primed mice with B. burgdorferi leads to significant production of IL-17 that contributes to the development of severe arthritis. Further, we demonstrate that regulatory T (Treg) cell depletion prior to infection results in hind paw swelling and the development of arthritis along with an increased B. burgdorferi-specific antibody response in an arthritis-resistant mouse model. We further demonstrate that Treg cells inhibit paw swelling and inflammatory cytokine production during the course of B. burgdorferi infection, but may not modulate severity of arthritis in established disease. Based on our findings, this suggests that Treg cells present prior to B. burgdorferi infection results in regulation of IL-17 by IL-10, thereby inhibiting pathology. Our findings identify novel regulatory mechanisms that may be responsible for resistance to Lyme arthritis, and suggest that modulation of Treg cells may prove useful in the development of new strategies for treatment and/or prevention of Lyme arthritis