Background T‐cell activation is associated with an adverse outcome in COVID‐19, but whether T‐cell activation and exhaustion relate to persistent respiratory dysfunction and death is unknown. Objectives To investigate whether T‐cell activation and exhaustion persist and are associated with prolonged respiratory dysfunction and death after hospitalization for COVID‐19. Methods Plasma and serum from two Norwegian cohorts of hospitalized patients with COVID‐19 (n = 414) were analyzed for soluble (s) markers of T‐cell activation (sCD25) and exhaustion (sTim‐3) during hospitalization and follow‐up. Results Both markers were strongly associated with acute respiratory failure, but only sTim‐3 was independently associated with 60‐day mortality. Levels of sTim‐3 remained elevated 3 and 12 months after hospitalization and were associated with pulmonary radiological pathology after 3 months. Conclusion Our findings suggest prolonged T‐cell exhaustion is an important immunological sequela, potentially related to long‐term outcomes after severe COVID‐19.