The E-2 was designated as a level and dive bomber, which could be fitted with a clamshell design dive brake, mounted aft of the elevator's rear edge on the fuselage, with rear-end-hinged dorsal and ventral "petals" opened and closed with a jackscrew. It was powered by BMW 801L engines and armed with forward firing 15mm MG 151, single MG 131 machine gun in dorsal turret, an MG 131 gun flexibly mounted at the rear of its ventral Bola gondola and three MG-15 machine guns. The E-2 entered production slightly later than the E-3 level bomber, and was produced in parallel, a total of 185 being built and entering service from summer 1941.

The Luftwaffe continued to develop the E series. Not satisfied with the E-1, it perfected a modified version it designated the E-2. Testing was not complete until March 1942. The prototype was Do 217 D-ABWC, which had arrived as an E-1 at Rechlin in mid-July 1939 for performance and tactical evaluations. Between that time and completion in March 1942, 34 reports were written in minute detail about all aspects of the Dornier's performance and systems. Improvements were added to existing E-1s, which were already being produced by late 1940, and to the prototypes V2 and V4 which would serve as the prototypes for the E-2. The V2 was given the DB 601 engines and a third aircraft, designated V4, was tested with Jumo 211s. Studies of the aircraft began on 15 August 1939, running concurrently with the development of the E-1s. Level, dive and torpedo carrying roles were all examined. Emphasis was also place on developing a reliable reconnaissance type. These developments were significant as th e trials undertaken by the E-1 prototype had not shown any negative characteristics. Level bombing tests were very positive. Only Glider-bomber attacks using interception control, and with dive-brakes open, did not quite match the stringent specifications set some four years earlier. According to the test pilots, the aircraft performed well with either the DB 601A, Jumo 211A/B, or even the BMW 801A-1 engines. Pleasing the designers, the test pilots also noted that with all auxiliary bomb racks removed test flights showed at an altitude of 6,000 metres, the Do 217 was quite capable of making an operational range of 2,400 km. With the addition of two 900-litre tanks, it increased to 3,700 km.

The BMW 801 was the powerplant of choice, and although tested by the summer, 1942, the lack of replacements, low production on the usage of them in the Focke Wulf Fw 190 series, prevented large-scale operational testing under combat conditions. In September 1941 Flame dampeners were fitted and testing completed. These fittings proved useful for all night operations regardless of the role the Do 217 was asked to perform. Further innovations were made regarding the installment of reconnaissance equipment, namely the standard Rb 20/30 cameras. During this final phase, plans to construct and designate an E-1b with MG 131 turret was explored, but later shelved. Modifications were also made on the already operational E-1s before the E-2 entered service. One such modification was the installation of MG FF 20 mm cannons, the installation of a hand-held MG 131 in the forward-facing glazing of the cockpit and a MG 131 turret facing aft in the B position (rear cockpit covering the rear). De- icing systems were also installed in the cabin and tailplane for high altitude operations.

Production of the E-2 began in March 1942. Some twelve of the 280 produced at Friedrichshafen were used as testbeds to keep pace with the constantly changing series specifications. Two, Wrk nR. 1221 and 1228 functioned as testbeds for the BMW 801 L-2 engines as well as flights to assess the installation of auxiliary 300-, 900- and 1,200-litre fuel tanks. During this time, an E-2 equipped with lattice-type airbrakes appeared. It had been designed in June 1940. Its weaponry consisted of a fixed MG 151 in its nose and a MG 15 and the A position. Three rotating positions were put in the B and C stand positions. The machine resembled the Junkers Ju 188. Later it was installed with Kutonase (cable cutting equipment). The Do 217 E-1 and E-2 could reach 535 kph at 5,300 m and none had a problem with maintaining altitude with BMW 801s, even with weapons, dive-brakes and dampers added, provided it had an all-up-weight) of less than twelve tonnes. Machines over thirteen tonnes were difficul t to handle and needed experienced pilots at the controls.

The failure of the Heinkel He 111, Dornier Do 17, and Junkers Ju 88 during the Battle of Britain and The Blitz led the OKL to see the Do 217 as the only heavy bomber in the Luftwaffe which had the range, bombload and fighter defences for long-range bombing attacks. The E-2 had incorporated all the new design features such as the Drehlafette DL 131 turret and a modified bomb bay which allowed to hold 3,000 kg of bombs. The E-1s originally were given the FuG X, 16, 25 and PeilG V and FuBI 1 radio sets and navigation aids. The E-2 was given the FuBI2. In the next two variants, the E-3 and E-4, the Siemens FuG 101 electric altimeter was also added enabling thr pilot to conduct more accurate and safer low-level attacks. The E-1 had Rüstsätz /R1 racks for 1,800 kg or bombs, the /R2 wing rack and /R3s for 50 kg of bombs. Dornier wanted to increase the strength of the racks to increase the size of external loads. A specialist company which had often collaborated with Dornier, Technischen Auss endienst, developed the /R20 rack which enabled heavier loads to be carried. The /R20 enabled fixed MG 81Zs to be installed in the tail cone. The previous lattice air brake was removed; the drag was too much and it bent the fuselage out of shape, making the aircraft unsafe and hastening metal fatigue.

Sources:
Gunston, Bill - The Encyclodepia of the Worlds Combat aircraft, 1976, Chartwell Books, Inc., New York
Brown, Eric, Captain - Wings of the Luftwaffe, 1979, Airlife Publishing Ltd., Shrewsbury
Gunston, Bill & Wood, Tony - Hitler's Luftwaffe, 1977, Salamander Books Ltd., London
Donald, David - The Complete Encyclopedia Of World Aircraft, 1997, Brown Packaging Books Ltd., London
Wikipedia - Dornier Do 217