Background SARS-CoV-2 infection causes acute respiratory distress, which may progress to multiorgan failure and death. Severe COVID-19 disease is accompanied by reduced erythrocyte turnover, low hemoglobin levels along with increased total bilirubin and ferritin serum concentrations. Moreover, expansion of erythroid progenitors in peripheral blood together with hypoxia, anemia, and coagulopathies highly correlates with severity and mortality. We demonstrate that SARS-CoV-2 directly infects erythroid precursor cells, impairs hemoglobin homeostasis and aggravates COVID-19 disease. Methods Erythroid precursor cells derived from peripheral CD34+ blood stem cells of healthy donors were infected in vitro with SARS-CoV-2 alpha variant and differentiated into red blood cells (RBCs). Hemoglobin and iron metabolism in hospitalized COVID-19 patients and controls were analyzed in plasma-depleted whole blood samples. Raman trapping spectroscopy rapidly identified diseased cells. Results RBC precursors express ACE2 receptor and CD147 at day 5 of differentiation, which makes them susceptible to SARS-CoV-2 infection. qPCR analysis of differentiated RBCs revealed increased HAMP mRNA expression levels, encoding for hepcidin, which inhibits iron uptake. COVID-19 patients showed impaired hemoglobin biosynthesis, enhanced formation of zinc-protoporphyrine IX, heme-CO2, and CO-hemoglobin as well as degradation of Fe-heme. Moreover, significant iron dysmetablolism with high serum ferritin and low serum iron and transferrin levels occurred, explaining disturbances of oxygen-binding capacity in severely ill COVID-19 patients. Conclusions Our data identify RBC precursors as a direct target of SARS-CoV-2 and suggest that SARS-CoV-2 induced dysregulation in hemoglobin- and iron-metabolism contributes to the severe systemic course of COVID-19. This opens the door for new diagnostic and therapeutic strategies.