Dysregulated innate immune responses contribute to multisystem inflammatory syndrome in children (MIS-C), characterized by gastrointestinal, mucocutaneous, and/or cardiovascular injury occurring weeks after severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) exposure. To investigate innate immune functions, we stimulated ex vivo peripheral blood cells from MIS-C patients with agonists of Toll-like receptors (TLR), key innate immune response initiators. We found severely dampened cytokine responses and elevated gene expression of negative regulators of TLR signaling. Increased plasma levels of zonulin, a gut leakage marker, were also detected. These effects were also observed in fully convalescent children months after MIS-C recovery. When we investigated the genetic background of patients in relation to TLR responsiveness, we found that cells from MIS-C children carrying rare heterozygous variants of lysosomal trafficking regulator (LYST) were less refractory to TLR stimulation and exhibited lysosomal and mitochondrial abnormalities with altered energy metabolism. Moreover, these rare LYST variant heterozygous carriers tended to exhibit unfavorable clinical laboratory indicators of inflammation, including more profound lymphopenia. The results of our observational study have several implications. First, TLR hyporesponsiveness may be associated with hyperinflammation and/or excessive or prolonged stimulation with gut-originated TLR ligands. Second, TLR hyporesponsiveness during MIS-C may be protective, since LYST variant heterozygous carriers exhibited reduced TLR hyporesponsiveness and unfavorable clinical laboratory indicators of inflammation. Thus, links may exist between genetic background, ability to establish a refractory immune state, and MIS-C clinical spectrum. Third, the possibility exists that prolonged TLR hyporesponsiveness is one of the mechanisms driving long coronavirus disease (COVID), which highlights the need to monitor long-term consequences of MIS-C.