The words "his flesh," his physical body, are a metonym for his body dying. Alternate translation: "By the death of his body on the cross" (See: [[rc://en/ta/man/translate/figs-metonymy]])
The word "us" refers to Paul and the Ephesians. The Ephesians, as Gentiles, were separated from Paul and the other Jews. Alternate translation: "that separated us Jews and Gentiles from one another" (See: [[rc://en/ta/man/translate/figs-inclusive]])