The Merkava Mk.2 was developed in 1983, taking into account the experience of the Lebanon War, which highlighted the need for additional tank protection, including against shaped-charge munitions. The tank received a new fire control system, a laser warning system, and a new transmission. Additionally, the turret's protection was enhanced by installing additional armour screens. In a later version, designated Merkava Mk.2B, the tank also received a thermal sight, and the armour was increased further. The Merkava Mk.2 was first manufactured in 1983 and last produced in 1989, with 580 units constructed in total. It saw service in several local battles, where it performed well. The final Merkava Mk.2 tank was moved to reserve units in 2016. Most of the remaining tanks are currently in storage, though these might potentially be modified to become armoured personnel carriers. They were never exported.

The Merkava Mk.2B was introduced in Update "Wind of Change". Its main difference from the Merkava Mk.1B lies in the addition of composite screens on the sides of the hull and turret, providing the tank with additional protection against HEAT rounds and ATGMs. The tank also boasts a powerful gun and excellent survivability, aided by its laser warning system, a large number of smoke grenades, and its unconventional design - the frontal location of the engine compartment. This unusual engine placement protects the crew from hits to the front, but also increases the risk of engine failure and fire. The Merkava also has low mobility compared to many Western designs.