Although it has been more than 2 years since the start of the coronavirus disease 2019 (COVID-19) pandemic, COVID-19 continues to be a worldwide health crisis. Despite the development of preventive vaccines, therapies to treat COVID-19 and other inflammatory diseases remain a major unmet need in medicine. Our study sought to identify drivers of disease severity and mortality to develop tailored immunotherapy strategies to halt disease progression. We assembled the Mount Sinai COVID-19 Biobank, which was composed of almost 600 hospitalized patients followed longitudinally through the peak of the pandemic in 2020. Moderate disease and survival were associated with a stronger antigen presentation and effector T cell signature. In contrast, severe disease and death were associated with an altered antigen presentation signature, increased numbers of inflammatory immature myeloid cells, and extrafollicular activated B cells that have been previously associated with autoantibody formation. In severely ill patients with COVID-19, lung tissue-resident alveolar macrophages not only were drastically depleted but also had an altered antigen presentation signature, which coincided with an influx of inflammatory monocytes and monocyte-derived macrophages. In addition, we found that the size of the alveolar macrophage pool correlated with patient outcome and that alveolar macrophage numbers and functionality were restored to homeostasis in patients who recovered from COVID-19. These data suggest that local and systemic myeloid cell dysregulation are drivers of COVID-19 severity and modulation of alveolar macrophage numbers and activity in the lung may be a viable therapeutic strategy for the treatment of critical inflammatory lung diseases.