Although similar in appearance to Challenger 1, the Challenger 2 MBT has many improvements including a brand new turret armed with the lastest 120mm L30 rifled tank gun firing a new APFSDS-T (Armour Piercing Fin Discarding Sabot Tracer) projectile with a depleted uranium penetrator. The new computerized fire control system, all electric gun control and stabilizing system, and stabilized sights for the commander and the gunner give a high degree of first round hit probability under both day and night conditions. Standard equipment includes a thermal camera over the manlet of the 120mm gun which provides a picture for gunner and commander, as well as an NBC (Nuclear, Biological, Chemical) system, mounting points for additional fuel drums at the rear, and mounting points for a Combat Dozer Blade at the front of the hull.

Challenger 2 is in service with the British Army and with the Royal Army of Oman. The UK placed orders for 127 Challenger 2 tanks in 1991 and an additional 259 in 1994. In 1993 Oman ordered 18 Challenger 2 tanks and an order for a further 20 tanks was placed in November 1997. Challenger 2 entered service with the British Army in June 1998 and the last of the 386 tanks was delivered in April 2002. Deliveries for Oman were completed in 2001. Challenger 2 has seen operational service in Bosnia and Kosovo. British Army Challenger 2 tanks were deployed on active service in Operation Iraqi Freedom.