Widespread coronavirus disease (COVID)-19 is causing pneumonia, respiratory and multiorgan failure in susceptible individuals. Dysregulated immune response marks severe COVID-19, but the immunological mechanisms driving COVID-19 pathogenesis are still largely unknown, which is hampering the development of efficient treatments. Here we analyzed ~140 parameters of cellular and humoral immune response in peripheral blood of 41 COVID-19 patients and 16 age/gender-matched healthy donors by flow-cytometry, quantitative PCR, western blot and ELISA, followed by integrated correlation analyses with ~30 common clinical and laboratory parameters. We found that lymphocytopenia in severe COVID-19 patients (n=20) strongly affects T, NK and NKT cells, but not B cells and antibody production. Unlike increased activation of ICOS-1+ CD4+ T cells in mild COVID-19 patients (n=21), T cells in severe patients showed impaired activation, low IFN-γ production and high functional exhaustion, which correlated with significantly down-regulated HLA-DR expression in monocytes, dendritic cells and B cells. The latter phenomenon was followed by lower interferon responsive factor (IRF)-8 and autophagy-related genes expressions, and the expansion of myeloid derived suppressor cells (MDSC). Intriguingly, PD-L1-, ILT-3-, and IDO-1-expressing monocytic MDSC were the dominant producers of IL-6 and IL-10, which correlated with the increased inflammation and accumulation of regulatory B and T cell subsets in severe COVID-19 patients. Overall, down-regulated IRF-8 and autophagy-related genes expression, and the expansion of MDSC subsets could play critical roles in dysregulating T cell response in COVID-19, which could have large implications in diagnostics and design of novel therapeutics for this disease.