Background: Knowledge of the pathophysiology of COVID-19 is almost exclusively derived from studies that examined the immune response in blood. We here aimed to analyse the pulmonary immune response during severe COVID-19 and to compare this with blood responses. Methods: This was an observational study in patients with COVID-19 admitted to the intensive care unit (ICU). Mononuclear cells were purified from bronchoalveolar lavage fluid (BALF) and blood, and analysed by spectral flow cytometry; inflammatory mediators were measured in BALF and plasma. Findings: Paired blood and BALF samples were obtained from 17 patients, four of whom died in the ICU. Macrophages and T cells were the most abundant cells in BALF, with a high percentage of T cells expressing the yδT cell receptor. In the lungs, both CD4 and CD8 T cells were predominantly effector memory cells (87·3% and 83·8%, respectively), and these cells expressed higher levels of the exhaustion marker programmad death-1 than in peripheral blood. Prolonged ICU stay (>14 days) was associated with a reduced proportion of activated T cells in peripheral blood and even more so in BALF. T cell activation in blood, but not in BALF, was higher in fatal COVID-19 cases. Increased levels of inflammatory mediators were more pronounced in BALF than in plasma. Interpretation: The bronchoalveolar immune response in COVID-19 has a unique local profile that strongly differs from the immune profile in peripheral blood. Fully elucidating COVID-19 pathophysiology will require investigation of the pulmonary immune response.