The COVID-19 pandemic caused by severe acute respiratory syndrome coronavirus-2 (SARS-CoV-2) continues to spread globally, and rapid viral evolution and the emergence of new variants pose challenges to pandemic control. During infection, the spike protein of SARS-CoV-2 interacts with the human ACE2 protein via its receptor binding domain (RBD), and it is known that engineered forms of ACE2 can compete with wild-type (WT) ACE2 for binding to inhibit infection. Here, we conducted multiple replica molecular dynamics (MRMD) simulations to study the mechanisms of the engineered ACE2 variants 3N39 and 3N94 and provide directions for optimization. Our findings reveal that engineered ACE2 is notably more efficacious in systems that show weaker binding to WT ACE2 (i.e., WT and BA.1 RBD), but also faces immune escape as the virus evolves. Moreover, by modifying residue types near the binding interface, engineered ACE2 alters the electrostatic potential distribution and reconfigures the hydrogen bonding network, which results in modified binding to the RBD. However, this structural rearrangement does not occur in all RBD variants. In addition, we identified potentially engineerable beneficial residues and potentially engineerable detrimental residues in both ACE2 and RBD. Functional conservation can thus enable the optimization of these residues and improve the binding competitiveness of engineered ACE2, which therefore provides additional immune escape prevention. Finally, we conclude that these findings have implications for understanding the mechanisms responsible for engineered ACE2 and can help us to develop engineered ACE2 proteins that show superior performance.