WSL Stopped working with error: 0x80070003

WSL2 stopped working. When, I do a new installation of linux distro, it throws the following error on click of the launch button:

Installing, this may take a few minutes...
WslRegisterDistribution failed with error: 0x80070003
Error: 0x80070003 The system cannot find the path specified.

Press any key to continue...

the wsl --help command works fine however wsl -l command and other wsl commands throw the following error

The system cannot find the path specified.