Acute respiratory distress syndrome (ARDS), the most severe form of acute lung injury, is a devastating clinical syndrome with a high mortality rate (30-60%) (refs 1-3). Predisposing factors for ARDS are diverse and include sepsis, aspiration, pneumonias and infections with the severe acute respiratory syndrome (SARS) coronavirus. At present, there are no effective drugs for improving the clinical outcome of ARDS. Angiotensin-converting enzyme (ACE) and ACE2 are homologues with different key functions in the renin-angiotensin system. ACE cleaves angiotensin I to generate angiotensin II, whereas ACE2 inactivates angiotensin II and is a negative regulator of the system. ACE2 has also recently been identified as a potential SARS virus receptor and is expressed in lungs. Here we report that ACE2 and the angiotensin II type 2 receptor (AT2) protect mice from severe acute lung injury induced by acid aspiration or sepsis. However, other components of the renin-angiotensin system, including ACE, angiotensin II and the angiotensin II type 1a receptor (AT1a), promote disease pathogenesis, induce lung oedemas and impair lung function. We show that mice deficient for Ace show markedly improved disease, and also that recombinant ACE2 can protect mice from severe acute lung injury. Our data identify a critical function for ACE2 in acute lung injury, pointing to a possible therapy for a syndrome affecting millions of people worldwide every year.