Acute respiratory distress syndrome (ARDS) is a major cause of mortality in severe viral pneumonia, including COVID-19. Current antivirals reduce viral replication bu fail to address the dysregulated host inflammation that drives lung failure, while unmodified mesenchymal stromal cells (MSCs) have shown only modest benefits in clinical trials. To overcome these limitations, we engineered MSCs expressoing human ACE2 (MSCACE2), designed to couple direct antiviral activity with immonoregulation. In vitro, MSCACE2 cells bound and internalized SARS-CoV-2 through membrane-bound and soluble ACE2, permitting only transient replication before cytopathic clearance. In infected K18-hACE2 mice, intranasal delivery of MSCACE2 reduced viral burden, preserved ACE2 expression, limited neutrophil infiltration, and improved lung pathology. Proteomic analyses revealed broad reprogramming toward anti-inflammatory and reparative pathways. By integrating receptor-based viral sequestration with MSC-mediated immunomodulation, MSCACE2 cell treatment represents a mechanism-driven therapeutic platform with translational potential for COVID-19 and adaptability to future receptor-mediated viral pandemics.