Accurate interpretation of magnetotelluric (MT) data in the presence of static shift arising from near-surface inhomogeneities is an unresolved problem in three-dimensional (3-D) inversion. While it is well known in 1-D and 2-D studies that static shift can lead to erroneous interpretation, how static shift can influence the result of 3-D inversion is not fully understood and is relevant to improved subsurface analysis. Using the synthetic data generated from 3-D models with randomly distributed heterogeneous overburden and elongate homogeneous overburden that are consistent with geological observations, this paper examines the effects of near-surface inhomogeneity on the accuracy of 3-D inversion models. It is found that small-scale and shallow depth structures are severely distorted while the large-scale structure is marginally distorted in 3-D inversion not accounting for static shift; thus the erroneous near-surface structure does degrade the reconstruction of smaller-scale structure at any depth. However, 3-D joint inversion for resistivity and static shift significantly reduces the artifacts caused by static shifts and improves the overall resolution, irrespective of whether a zero-sum or Gaussian distribution of static shifts is assumed. The 3-D joint inversion approach works equally well for situations where the shallow bodies are of small size or long enough to allow some induction such that the effects of near-surface inhomogeneity are manifested as a frequency-dependent shift rather than a constant shift.