Abstract Acute respiratory distress syndrome (ARDS) is a common and devastating consequence of SARS-CoV-2 infection in adults, however severe lung injury is a rare manifestation of COVID-19 in children. Aberrant local immune responses are known to drive lung pathology in adults, but little is known about localized immune responses in children with respiratory failure due to COVID-19. We obtained blood and respiratory tract samples from children (n=35, aged 1 month to 18 years) admitted to the hospital for COVID-19, stratifying by presence of respiratory failure (n=15). We defined the cytokine and chemokine profile of severe disease using a 71 analyte Luminex panel. Children with respiratory failure were found to have increased circulating levels of leukemia inhibitory factor (LIF), a growth factor upregulated during pulmonary inflammation. The local environment revealed significant inflammation with increased levels of pro-inflammatory cytokines including IL-6, IL-8, and IL-33 among others. Application of high dimensional flow cytometry to define immune cell subsets revealed elevated proportions of monocytes in both circulating and local environments. Monocytes demonstrated decreased expression of HLA-DR and CD86, suggesting an immunoparalysis phenotype, previously associated with severe COVID-19 in adults. Further, effector memory T cells in the airway exhibited an exhausted phenotype with high levels of PD-1 expression. Together this analysis reveals a highly inflammatory and dysregulated immune response underlies SARS-CoV-2 induced pediatric lung injury. These findings suggest a shared pathway with adult COVID-19 ARDS and provide new insights into the immune mechanisms associated with severe COVID-19 in children. Supported by grants from NIH (K23AI141686)