SARS-CoV-2 is a novel coronavirus with a positively oriented single-stranded RNA that first appeared in December 2019. In this study, Angiotensin Converting Enzyme 2 (ACE2) loaded decoy liposomes were developed and characterized. ACE2 protein was loaded onto a liposomal carrier system and its toxicity and effectiveness were evaluated in cell culture and in vitro virus neutralization studies. Liposomes were prepared with the film hydration method and adjusted for size with the dialysis membrane method or the ultrasonic homogenization method. All formulations showed high entrapment efficiency between 99.98–79.6%. Liposomes with two different particle sizes above 2 µm and below 500 nm were obtained with the dialysis membrane method and homogenization method. Two optimum formulations, M6-S90 with a PDI value of 0.383 ± 0.053 and particle size of 397.7 ± 28.25 nm which was produced by ultrasonic homogenization and M6-4 with a PDI 0.769 ± 0.205 and particle size of 2606 ± 1396.00 were chosen as optimum formulations for further studies. M6-S90 was stable and showed low toxicity on Calu3 lung epithelial cells. Pre-incubation of M6-S90 with with 3.1 × 105 PFU/mL of SARS-CoV-2 followed by incubation with Vero E6 cells resulted in a 4 log fold change reduction in cell death compared to virus alone. This suggests that MS6-S90 had good neutralization activity on SARS-CoV-2 whilst maintaining viability of the host cell. The novel ACE-2 loaded decoy liposomes described in this study can be further evaluated for the treatment of COVID-19.