Challenger 2E is an export version of the Challenger 2 tank. It has a new integrated main weapon control and battlefield management system, which includes a gyrostabilised panoramic SAGEM MVS 580 day/thermal sight for the commander and SAGEM SAVAN 15 gyrostabilised day/thermal sight for the gunner, both with eyesafe laser rangefinder. This allows hunter/killer operations with a common engagement sequence. An optional servo-controlled overhead weapons platform can be slaved to the commander's sight to allow operation independent from the turret.

The power pack has been replaced with a new 1,500 hp (1,100 kW) EuroPowerPack with transversely mounted MTU MT 883 diesel engine coupled to Renk HSWL 295TM automatic transmission.

The increase in vehicle performance is significant. The smaller volume but more powerful power pack incorporates as standard a cooling system and air-intake filtration system proved in desert use. The free space in the hull is available for ammunition stowage or for fuel, increasing the tannk’s range to 550 km.

BAE announced in 2005 that development and export marketing of 2E would stop. This has been linked by the media to the failure of the 2E to be selected for the Hellenic Army in 2002, a competition won by the Leopard 2.