Files that have the BZ2 extension have been created using the open source compression software bzip2, which is typically used on UNIX or Linux systems. BZ2 is often the compression used for popular file containers that don't support compression (like TAR files), so they may have a name like. In this tutorial, we will look at how to compress and decompress. What is a BZ2 file extension? BZ2 is a file extension used for containing files compressed with BZIP2 open source compression method.