Hospital-based transmission had a dominant role in Middle East respiratory syndrome coronavirus (MERS-CoV) and severe acute respiratory syndrome coronavirus (SARS-CoV) epidemics1, 2, but large-scale studies of its role in the SARS-CoV-2 pandemic are lacking. Such transmission risks spreading the virus to the most vulnerable individuals and can have wider-scale impacts through hospital–community interactions. Using data from acute hospitals in England, we quantify within-hospital transmission, evaluate likely pathways of spread and factors associated with heightened transmission risk, and explore the wider dynamical consequences. We estimate that between June 2020 and March 2021 between 95,000 and 167,000 inpatients acquired SARS-CoV-2 in hospitals (1% to 2% of all hospital admissions in this period). Analysis of time series data provided evidence that patients who themselves acquired SARS-CoV-2 infection in hospital were the main sources of transmission to other patients. Increased transmission to inpatients was associated with hospitals having fewer single rooms and lower heated volume per bed. Moreover, we show that reducing hospital transmission could substantially enhance the efficiency of punctuated lockdown measures in suppressing community transmission. These findings reveal the previously unrecognized scale of hospital transmission, have direct implications for targeting of hospital control measures and highlight the need to design hospitals better equipped to limit the transmission of future high-consequence pathogens.