Introduced in 1983 and adopted by all branches a few years later, it featured a longer, stronger buttstock, round handguards, more complex rear sight with different sized apertures, brass deflector, a slightly different pistol grip, closed bottom birdcage flash hider to reduce dust signature and act as a compensator.
It also featured a heavier government profile barrel (light under the handguards) in 1-in-7 twist as a compromise of the best twist rate for the 62g M855 ammo (with a steel penetrator for better performance on Soviet helmets at 600 meters and light cover) and the M856 tracer round (which was much longer than the M855 round due it needing to store the tracer compound). Selector switch, safe, semi, and burst (3 round).
Most changes were prompted by the USMC.
The switch to 3 round burst was added instead of full auto in order to promote more deliberate shooting and ammo conservation. The M16A3 would be exactly like this rifle only to include the option for full auto instead of 3-round burst. The M16A3 is used in some cases by the USN.
The M16A2, although still in use was later replaced by the M16A4.