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Background: Reports of ethnic inequalities in COVID-19 outcomes are conflicting and the reasons for any differences in outcomes are unclear. We investigated ethnic inequalities in critical care admission patterns, the need for invasive mechanical ventilation (IMV), and in-hospital mortality, among hospitalised patients with COVID-19. \ud \ud Methods: We undertook a prospective cohort study in which dedicated research staff recruited hospitalised patients with suspected/confirmed COVID-19 from 260 hospitals across England, Scotland and Wales, collecting data directly and from records between 6th February and 8th May 2020 with follow-up until 22nd May 2020. Analysis used hierarchical regression models accounting for confounding, competing risks, and clustering of patients in hospitals. Potential mediators for death were explored with a three-way decomposition mediation analysis. \ud \ud Findings: Of 34,986 patients enrolled, 30,693 (88%) had ethnicity recorded: South Asian (1,388, 5%), East Asian (266, 1%), Black (1,094, 4%), Other Ethnic Minority (2,398, 8%) (collectively Ethnic Minorities), and White groups (25,547, 83%). Ethnic Minorities were younger and more likely to have diabetes (type 1/type 2) but had fewer other comorbidities such as chronic heart disease or dementia than the White group. No difference was seen between ethnic groups in the time from symptom onset to hospital admission, nor in illness severity at admission. Critical care admission was more common in South Asian (odds ratio 1.28, 95% confidence interval 1.09 to 1.52), Black (1.36, 1.14 to 1.62), and Other Ethnic Minority (1.29, 1.13 to 1.47) groups compared to the White group, after adjusting for age, sex and location. This was broadly unchanged after adjustment for deprivation and comorbidities. Patterns were similar for IMV. Higher adjusted mortality was seen in the South Asian (hazard ratio 1.19, 1.05 to 1.36), but not East Asian (1.00, 0.74 to 1.35), Black (1.05, 0.91 to 1.26) or Other Ethnic Minority (0.99, 0.89 to 1.10) groups, compared to the White group. 18% (95% CI, 9% to 56%) of the excess mortality in South Asians was mediated by pre-existing diabetes. \ud \ud Interpretation: Ethnic Minorities in hospital with COVID-19 were more likely to be admitted to critical care and receive IMV than Whites, despite similar disease severity on admission, similar duration of symptoms, and being younger with fewer comorbidities. South Asians are at greater risk of dying, due at least in part to a higher prevalence of pre-existing diabetes. \ud \ud Trial Registration: The study was registered at https://www.isrctn.com/ISRCTN66726260. \ud \ud Funding Statement: This work is supported by grants from: the National Institute for Health Research [award CO-CIN-01], the Medical Research Council [grant MC_PC_19059] and by the National Institute for Health Research Health Protection Research Unit (NIHR HPRU) in Emerging and Zoonotic Infections at University of Liverpool in partnership with Public Health England (PHE), in collaboration with Liverpool School of Tropical Medicine and the University of Oxford [NIHR award 200907], Wellcome Trust and Department for International Development [215091/Z/18/Z], and the Bill and Melinda Gates Foundation [OPP1209135], and Liverpool Experimental Cancer Medicine Centre for providing infrastructure support for this research (Grant Reference: C18616/A25153). JSN-V-T is seconded to the Department of Health and Social Care, England (DHSC).