The highly pathogenic avian influenza (HPAI) H5N1 influenza virus has been a public health concern for more than a decade because of its frequent zoonoses and the high case fatality rate associated with human infections. Severe disease following H5N1 influenza infection is often associated with dysregulated host innate immune response also known as cytokine storm but the virological and cellular basis of these responses has not been clearly described. We rescued a series of 6:2 reassortant viruses that combined a PR8 HA/NA pairing with the internal gene segments from human adapted H1N1, H3N2, or avian H5N1 viruses and found that mice infected with the virus with H5N1 internal genes suffered severe weight loss associated with increased lung cytokines but not high viral load. This phenotype did not map to the NS gene segment, and NS1 protein of H5N1 virus functioned as a type I IFN antagonist as efficient as NS1 of H1N1 or H3N2 viruses. Instead we discovered that the internal genes of H5N1 virus supported a much higher level of replication of viral RNAs in myeloid cells in vitro but not in epithelial cells and that this was associated with high induction of type I IFN in myeloid cells. We also found that in vivo during H5N1 recombinant virus infection cells of haematopoetic origin were infected and produced type I IFN and proinflammatory cytokines. Taken together our data infer that human and avian influenza viruses are differently controlled by host factors in alternative cell types; internal gene segments of avian H5N1 virus uniquely drove high viral replication in myeloid cells, which triggered an excessive cytokine production, resulting in severe immunopathology.