The global COVID-19 pandemic has claimed the lives of more than 750,000 US citizens. Dysregulation of the immune system underlies the pathogenesis of COVID-19, with inflammation mediated tissue injury to the lung in the setting of suppressed systemic immune function. To define the molecular mechanisms of immune dysfunction in COVID-19 we utilized a systems immunology approach centered on the circulating leukocyte phosphoproteome measured by mass cytometry. We find that although COVID-19 is associated with wholesale activation of a broad set of signaling pathways across myeloid and lymphoid cell populations, STAT3 phosphorylation predominated in both monocytes and T cells. STAT3 phosphorylation was tightly correlated with circulating IL-6 levels and high levels of phospho-STAT3 was associated with decreased markers of myeloid cell maturation/activation and decreased ex-vivo T cell IFN-γ production, demonstrating that during COVID-19 dysregulated cellular activation is associated with suppression of immune effector cell function. Collectively, these data reconcile the systemic inflammatory response and functional immunosuppression induced by COVID-19 and suggest STAT3 signaling may be the central pathophysiologic mechanism driving immune dysfunction in COVID-19.