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Bacterial arthritis in sheep is a painful and debilitating condition that is widespread across all sheep-raising regions and climatic zones of Australia. At slaughter, bacterial arthritis in sheep causes economic losses through the condemnation of all or parts of the carcass, as specified in the Australian Standard for the Hygienic Production and Transportation of Meat and Meat Products for Human Consumption. In this study, we investigated the economic cost of arthritis in lambs presenting to an abattoir in southern Australia using a combination of the prevalence of arthritis detected during meat inspection, condemnation rates, trim weight and carcass weight, and fat measurements. Data were collected on 354 lines of lambs representing 63287 carcasses. One hundred and sixty nine consignments, or approximately one-half of the consignments, had at least one carcass with arthritis/polyarthritis detected by meat inspection personnel. Four hundred and twenty-two, or 0.7%, of the carcasses had arthritis/polyarthritis in at least one joint. When arthritis was present, on average 2.0% of the line was affected. Three carcasses with arthritis were condemned and the remainder trimmed, with an average trim weight of 0.7 kg. In addition, arthritis reduced the growth of lambs by 1.2 kg hot standard carcass weight, approximately 2.7 kg liveweight (assuming 45% dressing percentage) and reduced fat cover by 1.8 mm.