Dexamethasone reduces mortality in patients with severe COVID-19, but the mechanism has been elusive. Using single-cell RNA sequencing and plasma proteomics, Rosin, Yipp, Biernaskie and colleagues investigated immune cell dynamics in patients with severe COVID-19 and acute respiratory distress syndrome (ARDS) who either did or did not receive dexamethasone, and compared these to patients with bacterial ARDS and healthy volunteers. COVID-19 seemed to promote the enrichment of specific neutrophil states characterized by enhanced type I interferon (IFN) activation (IFNactive) or by prostaglandin signalling. Dexamethasone treatment was associated with global alterations in neutrophil sub-states, a suppression of IFN networks, a depletion of IFNactive neutrophils and an expansion of immature and immunosuppressive neutrophils, indicating that dexamethasone limits neutrophil pathogenicity.