T2In 1968, the second generation of the Type 2 was introduced. It was built in Germany until 1979, with production shifting to Mexico in 1980. Models before 1971 are often called the T2a, while models after 1972 are called the T2b.

This second-generation Type 2 lost its distinctive split front windscreen and was slightly larger and considerably heavier than its predecessor. Its common nicknames are Breadloaf and Bay-window, or Loaf and Bay for short

The T2b was introduced by way of gradual change over three years. An important change came with the introduction of front disc brakes and new wheels with brake ventilation holes and flatter hubcaps. 1972's most prominent change was a bigger engine compartment to fit the larger 1.7 to 2.0 L engines and a redesigned rear end which eliminated the removable rear apron. The air inlets were also enlarged to accommodate the increased cooling air needs of the larger engines.

1973 also saw the most noticeable exterior changes. The front turn indicators were squared off from the previous version and set higher in the front valence, above the headlights. Larger taillights were added to comply with U.S. lighting requirements as were larger bumpers. Crash safety improved greatly with this change due to a compressible structure behind the front bumper. This meant that the T2b was capable of meeting US safety standards for passenger cars of the time, though being vans they were not required to. The only thing that shrunk on the new model, or so it seemed, was the large and distinctive "VW" emblem on the front of the early model.

Later model changes were primarily under the skin. By 1974, the T2 had gained its final shape. Very late in the T2's design life, during the late 1970s, the first prototypes of Type 2 vans with four wheel drive were built and tested.

The T2c, so called since it got a slightly raised roof by about 10 cm in the early 1990s, was built for the South American and Central American markets.

Since 1997, the T2c has been built in Brazil with air-cooled engines for the Brazilian market and with water-cooled engines for the Mexican market, the latter easily identified by their large, black-coloured, front-mounted radiators.