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Objectives We aimed to gain an understanding of the paradox of the immunity in COVID‐19 patients with T cells showing both functional defects and hyperactivation and enhanced proliferation. Methods A total of 280 hospitalised patients with COVID‐19 were evaluated for cytokine profiles and clinical features including viral shedding. A mouse model of acute infection by lymphocytic choriomeningitis virus (LCMV) was applied to dissect the relationship between immunological, virological and pathological features. The results from the mouse model were validated by published data set of single‐cell RNA sequencing (scRNA‐seq) of immune cells in bronchoalveolar lavage fluid (BALF) of COVID‐19 patients. Results The levels of soluble CD25 (sCD25), IL‐6, IL‐8, IL‐10 and TNF‐α were higher in severe COVID‐19 patients than non‐severe cases, but only sCD25 was identified as an independent risk factor for disease severity by multivariable binary logistic regression analysis and showed a positive association with the duration of viral shedding. In agreement with the clinical observation, LCMV‐infected mice with high levels of sCD25 demonstrated insufficient anti‐viral response and delayed viral clearance. The elevation of sCD25 in mice was mainly contributed by the expansion of CD25+CD8+ T cells that also expressed the highest level of PD‐1 with pro‐inflammatory potential. The counterpart human CD25+PD‐1+ T cells were expanded in BALF of COVID‐19 patients with severe disease compared to those with modest disease. Conclusion These results suggest that high levels of sCD25 in COVID‐19 patients probably result from insufficient anti‐viral immunity and indicate an expansion of pro‐inflammatory T cells that contribute to disease severity., High levels of soluble CD25 in COVID‐19 patients were found being associated with severe disease and prolonged viral shedding. We discovered that the elevation of sCD25 was caused by the insufficient anti‐viral T‐cell immune response and the resulting expansion of CD25+PD−1+CD8+ T cells. CD25+PD−1+CD8+ T cells that expressed CD38 and Ki‐67 participated pro‐inflammatory response and drove disease severity.