Disease manifestations in COVID-19 range from mild to severe illness associated with a dysregulated innate immune response. Alterations in function and regeneration of dendritic cells (DCs) and monocytes may contribute to immunopathology and influence adaptive immune responses in COVID-19 patients. We analyzed circulating DC and monocyte subsets in 65 hospitalized COVID-19 patients with mild/moderate or severe disease from acute illness to recovery and in healthy controls. Persisting reduction of all DC subpopulations was accompanied by an expansion of proliferating Lineage-HLADR+ cells lacking DC markers. Increased frequency of CD163+ CD14+ cells within the recently discovered DC3 subpopulation in patients with more severe disease was associated with systemic inflammation, activated T follicular helper cells, and antibody-secreting cells. Persistent downregulation of CD86 and upregulation of programmed death-ligand 1 (PD-L1) in conventional DCs (cDC2 and DC3) and classical monocytes associated with a reduced capacity to stimulate naïve CD4+ T cells correlated with disease severity. Long-lasting depletion and functional impairment of DCs and monocytes may have consequences for susceptibility to secondary infections and therapy of COVID-19 patients.