This work documents version two of the Department of Energy’s Energy Exascale Earth System Model (E3SM). E3SM version 2 (E3SMv2) is a significant evolution from its predecessor E3SMv1, resulting in a model that is nearly twice as fast and with a simulated climate that is improved in many metrics. We describe the physical climate model in its lower horizontal resolution configuration consisting of 110 km atmosphere, 165 km land, 0.5° river routing model, and an ocean and sea ice with mesh spacing varying between 60 km in the mid-latitudes and 30 km at the equator and poles. The model performance is evaluated by means of a standard set of Coupled Model Intercomparison Project Phase 6 (CMIP6) Diagnosis, Evaluation, and Characterization of Klima (DECK) simulations augmented with historical simulations as well as simulations to evaluate impacts of different forcing agents. The simulated climate is generally realistic, with notable improvements in clouds and precipitation compared to E3SMv1. E3SMv1 suffered from an excessively high equilibrium climate sensitivity (ECS) of 5.3 K. In E3SMv2, ECS is reduced to 4.0 K which is now within the plausible range based on a recent World Climate Research Programme (WCRP) assessment. However, E3SMv2 significantly underestimates the global mean surface temperature in the second half of the historical record. An analysis of single-forcing simulations indicates that correcting the historical temperature bias would require a substantial reduction in the magnitude of the aerosol-related forcing.