SARS-CoV-2 uses the receptor binding domain (RBD) of its spike protein to recognize and infect host cells by binding to the cell surface receptor angiotensin converting enzyme 2 (ACE2). The ACE2 receptor is composed of peptidase domain (PD), collectrin-like domain, transmembrane domain, and short cytoplasmic domain, and may exist as a dimer on cell surface. The RBD binding site is located atop of the ACE2 PD, but the involvement of other domains in virus infection is uncertain. We found that the ACE2 PD alone, whether anchored to cell membrane via a glycosylphosphatidylinositol anchor or attached to another surface protein, is fully functional as a receptor for spike-mediated cell fusion and virus infection. However, for ACE2 to function as the viral receptor, the RBD binding site must be positioned in close proximity to the cell membrane. Elevating the surface height of ACE2 using long and rigid protein spacers reduces or eliminates cell fusion and virus infection. Moreover, we found that the RBD-targeting neutralizing antibodies, nanobodies, and de novo designed miniprotein binders, when present on cell surface, also act as viral receptors, facilitating cell fusion and virus infection. Our data demonstrate that RBD binding and close membrane proximity are essential properties for a receptor to effectively mediate SARS-CoV-2 infection. Importantly, we show that soluble RBD-binders can be engineered to make cells either susceptible or resistant to virus infection, which has significant implications for antiviral therapy and various virus-mediated applications.