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Abstract Background The entry of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) into the host cell is mediated through the binding of the SARS-CoV-2 Spike protein via the receptor binding domain (RBD) to human angiotensin-converting enzyme 2 (hACE2). Identifying compounds that inhibit Spike-ACE2 binding would be a promising and safe antiviral approach against COVID-19. Methods In this study, we used a BSL-2 compatible replication-competent vesicular stomatitis virus (VSV) expressing Spike protein of SARS-CoV-2 with eGFP reporter system (VSV-eGFP-SARS-CoV-2) in a recombinant permissive cell system for high-throughput screening of viral entry blockers. The SARS-CoV-2 permissive reporter system encompasses cells that stably express hACE2-tagged cerulean and H2B tagged with mCherry, as a marker of nuclear condensation, which also enables imaging of fused cells among infected EGFP positive cells and could provide real-time information on syncytia formation. Results A limited high-throughput screening identified six natural products that markedly inhibited VSV-eGFP-SARS-CoV-2 with minimum toxicity. Further studies of Spike-S1 binding using the permissive cells showed Scillaren A and 17-Aminodemethoxygeldanamycin could inhibit S1 binding to ACE2 among the six leads. A real-time imaging revealed delayed inhibition of syncytia by Scillaren A, Proscillaridin, Acetoxycycloheximide and complete inhibition by Didemnin B indicating that the assay is a reliable platform for any image-based drug screening. Conclusion A BSL-2 compatible assay system that is equivalent to the infectious SARS-CoV-2 is a promising tool for high-throughput screening of large compound libraries for viral entry inhibitors against SARS-CoV-2 along with toxicity and effects on syncytia. Studies using clinical isolates of SARS-CoV-2 are warranted to confirm the antiviral potency of the leads and the utility of the screening system.