Natural killer (NK) cells are cytotoxic effector cells that target and lyse virally infected cells; many viruses therefore encode mechanisms to escape such NK cell killing. Here, we interrogate the ability of SARS-CoV-2 to modulate NK cell recognition and lysis of infected cells. We find that NK cells exhibit poor cytotoxic responses against SARS-CoV-2-infected targets, preferentially killing uninfected bystander cells. We demonstrate that this escape is driven by downregulation of ligands for the activating receptor NKG2D (NKG2D-L). Indeed, early in viral infection, prior to NKG2D-L downregulation, NK cells are able to target and kill infected cells; however, this ability is lost as viral proteins are expressed. Finally, we find that SARS-CoV-2 non-structural protein 1 (Nsp1) mediates downregulation of NKG2D-L and that Nsp1 alone is sufficient to confer resistance to NK cell killing. Collectively, our work demonstrates that SARS-CoV-2 evades direct NK cell cytotoxicity and describes a mechanism by which this occurs.