Fire-induced permafrost degradation is well documented in boreal forests, but the role of fires in initiating thermokarst development in Arctic tundra is less well understood. Here we show that Arctic tundra fires may induce widespread thaw subsidence of permafrost terrain in the first seven years following the disturbance. Quantitative analysis of airborne LiDAR data acquired two and seven years post-fire, detected permafrost thaw subsidence across 34% of the burned tundra area studied, compared to less than 1% in similar undisturbed, ice-rich tundra terrain units. The variability in thermokarst development appears to be influenced by the interaction of tundra fire burn severity and near-surface, ground-ice content. Subsidence was greatest in severely burned, ice-rich upland terrain (yedoma), accounting for ~50% of the detected subsidence, despite representing only 30% of the fire disturbed study area. Microtopography increased by 340% in this terrain unit as a result of ice wedge degradation. Increases in the frequency, magnitude, and severity of tundra fires will contribute to future thermokarst development and associated landscape change in Arctic tundra regions.