ABSTRACT Early stages of deadly respiratory diseases such as COVID-19 have been challenging to elucidate due to lack of an experimental system that recapitulates the cellular and structural complexity of the human lung while allowing precise control over disease initiation and systematic interrogation of molecular events at cellular resolution. Here we show healthy human lung slices cultured ex vivo can be productively infected with SARS-CoV-2, and the cellular tropism of the virus and its distinct and dynamic effects on host cell gene expression can be determined by single cell RNA sequencing and reconstruction of “infection pseudotime” for individual lung cell types. This revealed that the prominent SARS-CoV-2 target is a population of activated interstitial macrophages (IMs), which as infection proceeds accumulate thousands of viral RNA molecules per cell, comprising up to 60% of the cellular transcriptome and including canonical and novel subgenomic RNAs. During viral takeover of IMs, there is cell-autonomous induction of a pro-fibrotic program ( TGFB1 , SPP1 ), and an inflammatory program characterized by the early interferon response, chemokines ( CCL2 , 7, 8 , 13, CXCL10 ) and cytokines ( IL6, IL10) , along with destruction of cellular architecture and formation of dense viral genomic RNA bodies revealed by super-resolution microscopy. In contrast, alveolar macrophages (AMs) showed neither viral takeover nor induction of a substantial inflammatory response, although both purified AMs and IMs supported production of infectious virions. Spike-dependent viral entry into AMs was neutralized by blockade of ACE2 or Sialoadhesin/CD169, whereas IM entry was neutralized only by DC-SIGN/CD209 blockade. These results provide a molecular characterization of the initiation of COVID-19 in human lung tissue, identify activated IMs as a prominent site of viral takeover and focus of inflammation and fibrosis, and suggest therapeutic targeting of the DC-SIGN/CD209 entry mechanism to prevent IM infection, destruction and early pathology in COVID-19 pneumonia. Our approach can be generalized to define the initiation program and evaluate therapeutics for any human lung infection at cellular resolution.