Phagocytosed Borrelia burgdorferi (Bb) induces inflammatory signals that differ both quantitatively and qualitatively from those generated by spirochetal lipoproteins interacting with Toll-like receptor (TLR) 1/2 on the surface of human monocytes. Of particular significance, and in contrast to lipoproteins, internalized spirochetes induce transcription of IFN-β. Using inhibitory immunoregulatory DNA sequences (IRSs) specific to TLR7, TLR8, and TLR9, we show that the TLR8 inhibitor IRS957 significantly diminishes production of TNF-α, IL-6, and IL-10 and completely abrogates transcription of IFN-β in Bb-stimulated monocytes. We demonstrate that live Bb induces transcription of TLR2 and TLR8, whereas IRS957 interferes with their transcriptional regulation. Using confocal and epifluorescence microscopy, we show that baseline TLR expression in unstimulated monocytes is greater for TLR2 than for TLR8, whereas expression of both TLRs increases significantly upon stimulation with live spirochetes. By confocal microscopy, we show that TLR2 colocalization with Bb coincides with binding, uptake, and formation of the phagosomal vacuole, whereas recruitment of both TLR2 and TLR8 overlaps with degradation of the spirochete. We provide evidence that IFN regulatory factor (IRF) 7 is translocated into the nucleus of Bb-infected monocytes, suggesting its activation through phosphorylation. Taken together, these findings indicate that the phagosome is an efficient platform for the recognition of diverse ligands; in the case of Bb, phagosomal signaling involves a cooperative interaction between TLR2 and TLR8 in pro- and antiinflammatory cytokine responses, whereas TLR8 is solely responsible for IRF7-mediated induction of IFN-β.