Severe acute malnutrition (SAM) is the most high-risk form of undernutrition, particularly when children require hospitalization for complications. Complicated SAM is a multisystem disease with high inpatient and postdischarge mortality, especially in children with comorbidities such as HIV; however, the underlying pathogenesis of complicated SAM is poorly understood. Targeted multiplex biomarker analysis in children hospitalized with SAM (n = 264) was conducted on plasma samples, and inflammatory markers were assessed on stool samples taken at recruitment, discharge, and 12 to 24 and 48 weeks after discharge from three hospitals in Zimbabwe and Zambia. Compared with adequately nourished controls (n = 173), we found that at baseline, complicated SAM was characterized by systemic, endothelial, and intestinal inflammation, which was exacerbated by HIV infection. This persisted over 48 weeks despite nutritional recovery and was associated with children's outcomes. Baseline plasma concentrations of vascular endothelial growth factor, glucagon-like peptide-2, and intestinal fatty acid-binding protein were independently associated with lower mortality or hospital readmission over the following 48 weeks. Following principal components analysis of baseline biomarkers, higher scores of a component representing growth factors was associated with greater weight-for-height z score recovery and lower mortality or hospital readmission over the 48 weeks. Conversely, components representing higher gut and systemic inflammation were associated with higher mortality or hospital readmission. These findings highlight the interplay between inflammation, which damages tissues, and growth factors, which mediate endothelial and epithelial regeneration, and support further studies investigating interventions to reduce inflammation and promote epithelial repair as an approach to reducing mortality and improving nutritional recovery.