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Alpha-1 antitrypsin (AAT) is a serine protease inhibitor that protects tissue from neutrophil elastase and other proteases, particularly in the lung. Mutations in SERPINA1, including the Z mutation, lead to AAT deficiency (AATD), characterized by reduced circulating AAT and increased risk of pulmonary emphysema, liver cirrhosis, and hepatocellular carcinoma. Beyond these well-characterized manifestations, AATD has been associated with panniculitis, rheumatoid arthritis, and glomerulonephritis. Emerging evidence has also suggested a link between AATD and inflammatory bowel diseases (IBDs), although experimental validation is lacking. In this study, we demonstrate that PiZ transgenic mice expressing the polymer-forming ATZ display increased susceptibility to dextran sodium sulfate (DSS)-induced colitis, accompanied by marked Paneth cell abnormalities. The accumulation of polymeric ATZ in Paneth cells is associated with the endoplasmic reticulum (ER) stress response, impaired lysosomal clearance, altered association of Lysozyme-1 (Lyz1) with LC3-containing compartments, and increased Lyz1 secretion. These intestinal alterations were accompanied by changes in microbiota composition, whereas DSS exposure and exogenous lysozyme administration were associated with aggravated intestinal and hepatic pathology. Pharmacological inhibition of ER stress restored crypt homeostasis and normalized Lyz1 secretion. Human Pi*ZZ iPSC-derived intestinal organoids similarly showed ATZ polymer accumulation in secretory epithelial cells and transcriptional alterations involving ER protein processing and epithelial homeostasis. In addition, polymeric ATZ was detected in ileal crypts from a single individual with AATD and intestinal disease. Together, our data reveal a Paneth cell-intrinsic ER stress mechanism linking ATZ accumulation to gut epithelial dysfunction, highlighting a previously underexplored role of the gut-liver axis in AATD.