Shortly after design began on the Matilda I, it was realized that an infantry tank with more powerful armament than simply a machine gun was needed. This resulted in the Matilda II (A12) that, despite the linear designation, had little in common with its predecessor being based instead on the A7 medium tank prototype. The Matilda II was armed with a 2-pounder gun mounted on a cast turret with powered traverse that had particularly think armor. This made it practically invulnerable to most German ammunition save for 88-mm anti-tank guns that were introduced in 1941. The hull was also cast and well protected, and prominently large side skirts were added with characteristic mud chutes (five per side). The suspension was also adapted from the A7 and featured a set of five bogies on each side, these with four rollers that were arranged in pairs. It gave mixed performance in practice and limited the speed of the tank. The Matilda II saw combat mostly in North Africa where it earned the nickname of "Queen of the Desert", perhaps undeservedly so given its less than stellar performance: its 2-pounder gun was ineffective against German armor and that turret was too small for it to be upgraded to a 6-pounder. However, a few were also used in France in 1940, and by Australian forces in the Pacific. A large number were sent as Lend-Lease to the USSR where they were involved in the defense of Moscow and in the battles of 1942.

An initial contract for the A12 Infantry Tank Mark II, Matilda II was offered in 1936, with trials beginning in 1938. The Initial Matilda II (sometimes referred to as Mk I) had AEC engines (non-tropicalized in early units) and a 2-pounder gun, while the Mk II was broadly similar except for a different co-axial gun. The Mk III was powered by Leyland diesels which were improved in the Mk IV, while the final Mk. V had improvements to the great box and gear shift. A number of Matilda IIs were fitted with a 3-in howitzer and known as the Mk III CS. Meanwhile, the Mk. II CDL (Canal Defence Light) and Mk V CDL had the turret removed and replaced with powerful searchlights, the CDL designation being a code name for its actual purpose. These were only used much later during the Rhine crossings. Other variants included the Baron and Scorpion Mk I mine-clearing vehicles, and the Matilda AMRA (Anti-Mine Roller Attachment). Australian versions included the Matilda Frog and Murray flame-throwers and Matilda Dozer.