No. 2 Composite Squadron was formed on 15 April 1956, at PAF Base, Mauripur, with T-33 aircraft. Initially the squadron was given the name of 2 Squadron. Later, in April 1975, it was renamed as No. 2 Fighter Conversion Unit (2 FCU). The present name, 2 Composite Squadron was assigned to it in December 1979.

The initial role of the unit was to impart jet conversion training to the freshly graduated pilots from PAF Academy Risalpur and to carry out check rides and instrument ratings for all jet pilots of the air force. In May 1972, No. 20 Photo Reconnaissance Squadron was number-plated and its 3 RT-33s and all its photographic equipment were transferred to No. 2 Squadron to form a recce flight, thus expanding the role of the unit.

In December 1979, after the passing out of No 66 GD (P) and No. 4 Supplementary courses, the role of the unit was changed to that of a composite squadron assigned to perform a variety of tasks including ground controlled interceptions for the training of air defence controllers, and aerial targets towing for all three services; these were in addition to the earlier tasks of instrument ratings, checkouts and of photo recce. In August 1982, when No. 7 Squadron was temporarily number-plated, all its B-57 light bombers were also transferred to No. 2 Squadron, adding yet another role of night interdiction and special missions to the unit's assignments.

No. 2 Squadron has the unique honour of receiving the only Nishan-i-Haider awarded to the PAF. Pilot Officer Rashid Minhas laid down his life in a most extraordinary manner to defend the honour of his country, when he foiled the attempt of his much superior East Pakistani instructor to hijack his aircraft to India during the East Pakistan crisis in 1971.