Ecological studies suggested a link between air pollution and severe COVID-19 outcomes, while studies accounting for individual-level characteristics are limited. In the present study, we aimed to investigate the impact of short-term ambient air pollution exposure on disease severity among a cohort of 569 laboratory confirmed COVID-19 patients admitted to designated hospitals in Zhejiang province, China, from January 17 to March 3, 2020, and elucidate the possible biological processes involved using transcriptomics. Compared with mild cases, severe cases had higher proportion of medical conditions as well as unfavorable results in most of the laboratory tests, and manifested higher air pollution exposure levels. Higher exposure to air pollutants was associated with increased risk of severe COVID-19 with odds ratio (OR) of 1.89 (95% confidence interval (CI): 1.01, 3.53), 2.35 (95% CI: 1.20, 4.61), 2.87 (95% CI: 1.68, 4.91), and 2.01 (95% CI: 1.10, 3.69) for PM, PM, NO and CO, respectively. OR for NO remained significant in two-pollutant models after adjusting for other pollutants. Transcriptional analysis showed 884 differentially expressed genes which mainly were enriched in virus clearance related biological processes between patients with high and low NO exposure levels, indicating that compromised immune response might be a potential underlying mechanistic pathway. These findings highlight the impact of short-term air pollution exposure, particularly for NO, on COVID-19 severity, and emphasize the significance in mitigating the COVID-19 burden of commitments to improve air quality.