Luminous red novae (LRNe) are astrophysical transients associated with the partial ejection of a binary system's common envelope (CE) shortly before its merger. Here we present the results of our photometric and spectroscopic follow-up campaign of AT 2018bwo (DLT 18x), a LRN discovered in NGC 45, and investigate its progenitor system using binary stellar-evolution models. The transient reached a peak magnitude of M_r_=-10.97+/-0.11 and maintained this brightness during its optical plateau of t_p_=41+/-5d ays. During this phase, it showed a rather stable photospheric temperature of ~3300K and a luminosity of ~10^40^erg/s. Although the luminosity and duration of AT 2018bwo is comparable to the LRNe V838 Mon and M31-2015LRN, its photosphere at early times appears larger and cooler, likely due to an extended mass-loss episode before the merger. Toward the end of the plateau, optical spectra showed a reddened continuum with strong molecular absorption bands. The IR spectrum at +103 days after discovery was comparable to that of an M8.5 II type star, analogous to an extended AGB star. The reprocessed emission by the cooling dust was also detected in the mid-infrared bands ~1.5 years after the outburst. Archival Spitzer and Hubble Space Telescope data taken 10-14yrs before the transient event suggest a progenitor star with T_prog_~6500K, R_prog_~100R_{sun}_, and L_prog_=2x10^4^L_{sun}_, and an upper limit for optically thin warm (1000K) dust mass of M_d_<10^-6^M_{sun}_. Using stellar binary-evolution models, we determined the properties of binary systems consistent with the progenitor parameter space. For AT 2018bwo, we infer a primary mass of 12-16M_{sun}_, which is 9-45% larger than the ~11M_{sun}_ obtained using single-star evolution models. The system, consistent with a yellow-supergiant primary, was likely in a stable mass-transfer regime with -2.4 <= log (M_dot/Msun /yr) <= -1.2 a decade before the main instability occurred. During the dynamical merger, the system would have ejected 0.15-0.5M_{sun}_ with a velocity of ~500km/s.