Two-dimensional materials and their heterostructures constitute a promising platform to study correlated electronic states, as well as the many-body physics of excitons. Transport measurements on twisted graphene bilayers have revealed a plethora of intertwined electronic phases, including Mott insulators, strange metals and superconductors1,2,3,4,5. However, signatures of such strong electronic correlations in optical spectroscopy have hitherto remained unexplored. Here we present experiments showing how excitons that are dynamically screened by itinerant electrons to form exciton-polarons6,7 can be used as a spectroscopic tool to investigate interaction-induced incompressible states of electrons. We study a molybdenum diselenide/hexagonal boron nitride/molybdenum diselenide heterostructure that exhibits a long-period moiré superlattice, as evidenced by coherent hole-tunnelling-mediated avoided crossings of an intralayer exciton with three interlayer exciton resonances separated by about five millielectronvolts. For electron densities corresponding to half-filling of the lowest moiré subband, we observe strong layer pseudospin paramagnetism, demonstrated by an abrupt transfer of all the (roughly 1,500) electrons from one molybdenum diselenide layer to the other on application of a small perpendicular electric field. Remarkably, the electronic state at half-filling of each molybdenum diselenide layer is resilient towards charge redistribution by the applied electric field, demonstrating an incompressible Mott-like state of electrons. Our experiments demonstrate that optical spectroscopy provides a powerful tool for investigating strongly correlated electron physics in the bulk and paves the way for investigating Bose–Fermi mixtures of degenerate electrons and dipolar excitons.