Acute malnutrition affects more than 50 million children worldwide. These children are at an increased risk of morbidity and mortality from infectious disease. However, the pathogenesis of acute malnutrition and mechanisms underlying the increased risk and poor outcomes from infection are not well understood. Our objective was to identify differences in inflammation and inflammatory responses between children with moderate acute malnutrition (MAM) and healthy controls (HCs), and search for environmental, pathophysiological, and metabolic factors that may influence this response. Sixteen children with MAM and 16 HCs aged 18–36 months were studied in Nairobi, Kenya. None of the children had symptoms of an infectious disease (fever, diarrhea, or cough) in the 2 weeks before enrollment and sample collection. Demographic and health data were provided by their primary caregivers. Blood samples were collected to measure various biomarkers and the response to an inflammatory stimulus. Children with MAM were more frequently from households with contaminated water, crowding, and unstable income sources. They also had increases in basal inflammation, circulating bacterial lipopolysaccharide (LPS), markers of intestinal damage, and an exaggerated whole blood inflammatory response to LPS. Metabolic changes in children with MAM led to increased plasma levels of long-chain fatty acids, which were found to contribute to the pro-inflammatory state. These exploratory findings suggest convergence of multiple factors to promote dysregulated inflammatory responses and prompt several mechanistic hypotheses that can be pursued to better understand the pathogenesis of MAM.