The 737-200 is a 737-100 with an extended fuselage, launched by an order from United Airlines in 1965. The −200 was rolled out on June 29, 1967, and entered service in 1968. The 737-200 Advanced is an improved version of the −200, introduced into service by All Nippon airways on May 20, 1971. The −200 Advanced has improved aerodynamics, automatic wheel brakes, more powerful engines, more fuel capacity, and longer range than the −200. Boeing also provided the 737-200C (Convertible), which allowed for conversion between passenger and cargo use and the 737-200QC (Quick Change), which facilitated a rapid conversion between roles. The 1,095th and last delivery of a −200 series aircraft was in August 1988 to Xiamen Airlines. A large number of 737-200s are still in service, mostly with "second and third tier" airlines, as well as those of developing nations. In many cases, they are being phased out due to fuel efficiency, noise emissions (despite the vast majority having had their JT8Ds fitted with hush kits), and escalating maintenance costs when compared to their more modern cousins.

A key capability of the 737-200, which is not shared with any similarly-sized jet aircraft, is the ability to operate from unimproved or unpaved landing strips, such as gravel runways with a gravelkit modification installed. Gravel-kitted 737-200 Combis are currently used by Canadian North, First Air, Air Inuit and Air North in northern Canada. For many years, Alaska Ailines made use of gravel-kitted 737-200s to serve Alaska's many unimproved runways across the state.

Nineteen 737-200s were used to train aircraft navigators for the U.S. Air Force, designated T-43. Some were modified into CT-43s, which are used to transport passengers, and one was modified as the NT-43A Radar Test Bed. The first one was delivered on July 31, 1973, and the last on July 19, 1974. The Indonesian Air Force ordered three modified 737-200s, designated Boeing 737-2x9 Surveiller. They were used as Maritime reconnaissance (MPA)/transport aircraft, fitted with SLAMMAR (Side-looking Multi-mission Airborne Radar). The aircraft were delivered between May 1982 and October 1983.

After 40 years, the final 737-200 aircraft in the United States flying scheduled passenger service were phased out on March 31, 2008, with the last flights of Aloha Airlines (Aloha continues to fly its interisland cargo flights as Aloha Air Cargo). The aircraft had been eliminated from regular-scheduled service in the continental United States in 2006, when Delta Air Lines withdrew the type, but still sees regular service through North American charter operators such as Sierra Pacific, SkyKing, Amerijet and others. The variant has been in use by Bahamasair in the Bahamas for more than 30 years.

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