Malnutrition affects up to one billion people in the world and is a major cause of mortality. In many cases, malnutrition is associated with diarrhoea and intestinal inflammation, further contributing to morbidity and death. The mechanisms by which unbalanced dietary nutrients affect intestinal homeostasis are largely unknown. Here we report that deficiency in murine angiotensin I converting enzyme (peptidyl-dipeptidase A) 2 (Ace2), which encodes a key regulatory enzyme of the renin-angiotensin system (RAS), results in highly increased susceptibility to intestinal inflammation induced by epithelial damage. The RAS is known to be involved in acute lung failure, cardiovascular functions and SARS infections. Mechanistically, ACE2 has a RAS-independent function, regulating intestinal amino acid homeostasis, expression of antimicrobial peptides, and the ecology of the gut microbiome. Transplantation of the altered microbiota from Ace2 mutant mice into germ-free wild-type hosts was able to transmit the increased propensity to develop severe colitis. ACE2-dependent changes in epithelial immunity and the gut microbiota can be directly regulated by the dietary amino acid tryptophan. Our results identify ACE2 as a key regulator of dietary amino acid homeostasis, innate immunity, gut microbial ecology, and transmissible susceptibility to colitis. These results provide a molecular explanation for how amino acid malnutrition can cause intestinal inflammation and diarrhoea.