The severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) virus is highly contagious and causes lymphocytopenia, but the underlying mechanisms are poorly understood. We demonstrate here that heterotypic cell-in-cell structures with lymphocytes inside multinucleate syncytia are prevalent in the lung tissues of coronavirus disease 2019 (COVID-19) patients. These unique cellular structures are a direct result of SARS-CoV-2 infection, as the expression of the SARS-CoV-2 spike glycoprotein is sufficient to induce a rapid (~45.1 nm/s) membrane fusion to produce syncytium, which could readily internalize multiple lines of lymphocytes to form typical cell-in-cell structures, remarkably leading to the death of internalized cells. This membrane fusion is dictated by a bi-arginine motif within the polybasic S1/S2 cleavage site, which is frequently present in the surface glycoprotein of most highly contagious viruses. Moreover, candidate anti-viral drugs could efficiently inhibit spike glycoprotein processing, membrane fusion, and cell-in-cell formation. Together, we delineate a molecular and cellular rationale for SARS-CoV-2 pathogenesis and identify novel targets for COVID-19 therapy.