The angiotensin-converting enzyme 2 (ACE2) is a primary cell surface viral binding receptor for SARS-CoV-2, so finding new regulatory molecules to modulate ACE2 expression levels is a promising strategy against COVID-19. In the current study, we utilized islet organoids derived from human embryonic stem cells (hESCs), animal models and COVID-19 patients to discover that fibroblast growth factor 7 (FGF7) enhances ACE2 expression within the islets, facilitating SARS-CoV-2 infection and resulting in impaired insulin secretion. Using hESC-derived islet organoids, we demonstrated that FGF7 interacts with FGF receptor 2 (FGFR2) and FGFR1 to upregulate ACE2 expression predominantly in β cells. This upregulation increases both insulin secretion and susceptibility of β cells to SARS-CoV-2 infection. Inhibiting FGFR counteracts the FGF7-induced ACE2 upregulation, subsequently reducing viral infection and replication in the islets. Furthermore, retrospective clinical data revealed that diabetic patients with severe COVID-19 symptoms exhibited elevated serum FGF7 levels compared to those with mild symptoms. Finally, animal experiments indicated that SARS-CoV-2 infection increased pancreatic FGF7 levels, resulting in a reduction of insulin concentrations in situ. Taken together, our research offers a potential regulatory strategy for ACE2 by controlling FGF7, thereby protecting islets from SARS-CoV-2 infection and preventing the progression of diabetes in the context of COVID-19.