Background Sensorineural hearing loss (SNHL) has been suggested to occur in patients with Lyme neuroborreliosis (LNB); however, a clear association has never been documented. The present study prospectively investigated the development of SNHL in patients admitted for treatment of LNB using distortion-product-oto-acoustic emissions (DPOAE) as a measure of cochlear function. Methods DOAE were measured in patients with LNB on the day of diagnosis, during treatment, and 30–60 days after discharge. Frequencies were categorized as Low (1, 1.5, 2 kHz), Mid (3, 4, 5 kHz), Mid-high (6, 7, 8 kHz), and High (9, 10 kHz). Pure Tone Audiometry (PTA3) was performed at discharge and 60 days after. Patients were treated with i.v. ceftriaxone or oral doxycycline for 14 days according to guidelines. Results DPOAE measurements were obtained in 25 patients with LNB at admission and in 18 patients at follow-up. Median age was 56 years (IQR, 48–64 years), and 16 (67%) were men. Fourteen (78%) of 18 patients showed improvement in Emission Threshold Levels (ETL) from admission to follow-up in low, mid-, and mid-high frequency categories, where ETLs increased by median levels of 3.2 (−4.1 to 8.3), 7.5 (−2.8 to 9.8), and 4.7 dB (−4.3 to 10.1). A decline was observed in the high frequency category, median −3.3 dB (−9.1 to 6.7). SNHL defined by pure tone average (PTA3) >20 dB was present in 11 out of 23 (48%) at discharge and in 9 out of 16 patients (56%) 60 days after discharge, which differed significantly from matched controls (Mann-Whitney test, p = 0.036). Conclusion LNB can lead to cochlear outer-hair cell dysfunction, resulting in temporary and long-term SNHL.