diff --git a/src/milestones/milestones.controller.ts b/src/milestones/milestones.controller.ts
index 0aaf9d99..c6c30245 100644
--- a/src/milestones/milestones.controller.ts
+++ b/src/milestones/milestones.controller.ts
@@ -143,4 +143,19 @@ export class MilestonesController {
   allocateBudget(@Param('id', new ParseUUIDPipe()) id: string) {
     return this.milestonesService.allocateBudget(id);
   }
+
+  @ApiOperation({
+    summary: 'Close a milestone and refund its unspent balance',
+  })
+  @ApiBearerAuth()
+  @ApiStandardErrorResponses()
+  @UseGuards(JwtAuthGuard)
+  @Post(':id/close')
+  close(@Param('id', new ParseUUIDPipe()) id: string, @Req() req: Request) {
+    // There was no way to reach MilestoneStatus.CLOSED or refund the unspent
+    // escrow — a sponsor couldn't reclaim an unspent budget (#587). Sponsor-
+    // only; the service enforces it.
+    const userId = (req.user as { userId?: string }).userId;
+    return this.milestonesService.close(id, userId);
+  }
 }
diff --git a/src/milestones/milestones.service.ts b/src/milestones/milestones.service.ts
index c2b7ee8b..7ed7399a 100644
--- a/src/milestones/milestones.service.ts
+++ b/src/milestones/milestones.service.ts
@@ -130,6 +130,30 @@ export class MilestonesService {
     return this.issueRepo.save(issue);
   }
 
+  /**
+   * Sponsor-only close — transitions the milestone to CLOSED and refunds the
+   * escrow's remaining unspent balance. MilestoneStatus.CLOSED existed and the
+   * state machine allowed (OPEN|FUNDED|IN_PROGRESS) -> CLOSED, but no service/
+   * controller path reached it (#587) — a sponsor had no way to reclaim the
+   * unspent part of a milestone budget.
+   */
+  async close(milestoneId: string, callerUserId: string): Promise<Milestone> {
+    const milestone = await this.findOne(milestoneId);
+    if (milestone.sponsorId && milestone.sponsorId !== callerUserId) {
+      throw new ForbiddenException('Only the milestone sponsor can close it');
+    }
+    assertTransition(milestone.status, MilestoneStatus.CLOSED);
+
+    // Refund the remaining escrow balance — the sponsor keeps what wasn't
+    // distributed. releasePartial paid the contributors; refund returns the
+    // rest (#587).
+    if (milestone.escrowId) {
+      await this.escrowService.refund(milestone.escrowId);
+    }
+    milestone.status = MilestoneStatus.CLOSED;
+    return this.milestoneRepo.save(milestone);
+  }
+
   /**
    * Distributes this milestone's budget proportionally as its issues resolve.
    * TODO: support per-issue weighted budgets; currently splits the remaining