The possibility is explored that accretion on an intermediate-mass black hole contributes to the ionization of the interstellar medium of the compact blue dwarf galaxy MRK 996. Chandra observations set tight upper limits (99.7 per cent confidence level) in both the X-ray luminosity of the posited active galactic nucleus (AGN), LX(2–10 keV) < 3 × 1040 erg s−1, and the black hole mass, ≲104λ−1 M⊙, where λ is the Eddington ratio. The X-ray luminosity upper limit is insufficient to explain the high-ionization line [O iv] 25.89 μm, which is observed in the mid-infrared spectrum of MRK 996 and is proposed as evidence for AGN activity. This indicates that shocks associated with supernova explosions and winds of young stars must be responsible for this line. It is also found that the properties of the diffuse X-ray emission of MRK 996 are consistent with this scenario, thereby providing direct evidence for shocks that heat the galaxy's interstellar medium and contribute to its ionization.