Abstract Innate immune engagement results in the activation of host defenses that produce microbe-specific inflammatory responses. A long-standing interest in the field of innate immunity is to understand how varied host responses are generated through the signaling of just a limited number of receptors. Recently, intracellular trafficking and compartmental partitioning have been identified as mechanisms that provide signaling specificity for receptors by regulating signaling platform assembly. We show that cytokine activation as a result of TLR2 stimulation occurs at different intracellular locations and is mediated by the phagosomal trafficking molecule adaptor protein-3 (AP-3). AP-3 is required for trafficking TLR2 purified ligands or the Lyme disease causing bacterium, Borrelia burgdorferi, to LAMP-1 lysosomal compartments. The presence of AP-3 is necessary for the activation of cytokines such as IL-6 but not TNF-α or type I IFNs, suggesting induction of these cytokines occurs from a different compartment. Lack of AP-3 does not interfere with the recruitment of TLR signaling adaptors TRAM and MyD88 to the phagosome, indicating that the TLR-MyD88 signaling complex is assembled at a prelysosomal stage and that IL-6 activation depends on proper localization of signaling molecules downstream of MyD88. Finally, infection of AP-3–deficient mice with B. burgdorferi resulted in altered joint inflammation during murine Lyme arthritis. Our studies further elucidate the effects of phagosomal trafficking on tailoring immune responses in vitro and in vivo.