Multisystem inflammatory syndrome in children (MIS-C) presents with fever, inflammation and multiple organ involvement in individuals under 21 years following severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) infection. To identify genes, pathways and cell types driving MIS-C, we sequenced the blood transcriptomes of MIS-C cases, pediatric cases of coronavirus disease 2019, and healthy controls. We define a MIS-C transcriptional signature partially shared with the transcriptional response to SARS-CoV-2 infection and with the signature of Kawasaki disease, a clinically similar condition. By projecting the MIS-C signature onto a co-expression network, we identified disease gene modules and found genes downregulated in MIS-C clustered in a module enriched for the transcriptional signatures of exhausted CD8+ T-cells and CD56dimCD57+ NK cells. Bayesian network analyses revealed nine key regulators of this module, including TBX21, a central coordinator of exhausted CD8+ T-cell differentiation. Together, these findings suggest dysregulated cytotoxic lymphocyte response to SARS-Cov-2 infection in MIS-C.