Arp220 is the nearest and prototypical ULIRG, and shows evidence of pc-scale molecular outflows in its nuclear regions and strongly perturbed ionised gas kinematics on kpc scales. It is therefore the ideal system for investigating outflows and feedback phenomena in details. We investigate the feedback effects on the Arp220 ISM, deriving a detailed picture of the atomic gas in terms of physical and kinematic properties, with a spatial resolution never obtained before (0.56", i.e. ~ 210 pc). We use optical IFS observations from VLT/MUSE-AO to obtain spatially resolved stellar and gas kinematics, for both ionised ([N II]6583) and neutral (Na ID5891,96) components; we also derive dust attenuation, electron density, ionisation conditions and hydrogen column density maps to characterise the ISM properties. Arp220 kinematics reveal the presence of a disturbed, kpc-scale disk in the innermost nuclear regions, and highly perturbed, multi-phase (neutral and ionised) gas along the minor-axis of the disk, which we interpret as a galactic-scale outflow emerging from the Arp220 eastern nucleus. This outflow involves velocities up to ~ 1000 km/s at galactocentric distances of ~ 5 kpc, and has a mass rate of ~ 50 Msun/yr, and kinetic and momentum power of ~ 1e43 erg/s and ~ 1e35 dyne, respectively. The inferred energetics do not allow us to distinguish the origin of the outflows, i.e. whether they are AGN-driven or starburst-driven. We also present evidence for enhanced star formation at the edges of - and within - the outflow, with a star formation rate SFR ~ 5 Msun/yr (i.e. ~ 2% of the total SFR). Our findings suggest the presence of powerful winds in Arp220: they might be capable of removing or heating large amounts of gas from the host ("negative feedback"), but could be also responsible for triggering star formation ("positive feedback").