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Outside of North America, this generation of the Explorer was marketed in right-hand drive configurations[citation needed] As of 2018, RHD countries (such as Japan) export used examples of the Explorer to other countries (such as Australia and New Zealand) where there is demand for right-hand drive SUVs. Due to Japan's strict Shaken Laws, used vehicles tend to have low mileage with detailed repair histories.[8] In the United States, the second-generation Ford Explorer has the (dubious) distinction of being two of the top five vehicles traded in under the 2009 "Cash for Clunkers" program, with the 4WD model topping the list and the 2WD model coming in at number 4.[9]

The second-generation Ford Explorer is based upon the Ford U1 platform shared with its predecessor, adopting the UN105/UN150 model codes. Alongside similar changes in development for the 1998 Ford Ranger, the long-running Twin I-Beam/Twin Traction Beam front suspension was retired in favor of a short/long-arm (SLA) wishbone front suspension configuration. Along with more compact packaging of front suspension components, the design allowed for improved on-road handling/feel.

The optional engine of the Ford Ranger and Ford Aerostar, the 160 hp 4.0 L V6 was carried over from the first-generation Ford Explorer. To match the V8 engine of the similar-sized Jeep Grand Cherokee, for the 1996 model year, Ford introduced a 5.0 L V8 as an option. Initially available on rear-wheel drive XLT models, the availability of the 210 hp (157 kW) V8 was expanded to many versions of the five-door Explorer, and came standard with all-wheel-drive starting in 1997. For 1997, revised cylinder heads increased output of the 5.0 L V8 to 215 hp (160 kW). Following the January 1996 introduction of the 4.6 L SOHC V8 by the Ford F-Series and E-Series, the Explorer became the final vehicle sold by Ford Motor Company sold with a gasoline pushrod V8.

For 1997, the Ford Explorer gained a third engine, as Ford introduced an overhead-cam version of the 4.0 L Cologne V6. Using a common displacement with the pushrod 4.0 L V6, the 210 hp (157 kW) SOHC V6 rivaled the V8 in engine output. Offered as standard equipment on the top-trim Eddie Bauer and Limited trims, the engine became an option on all other versions of the Explorer and Explorer Sport. For 2001, the pushrod V6 was discontinued, with the SOHC becoming the standard engine in all versions of the Explorer (and the sole engine of the 3-door Explorer Sport).

For 2000, Ford added flex-fuel capability to the Explorer for the first time.

A Mazda-produced 5-speed manual was standard with OHV V6 engine. The SOHC did not receive the 5-speed until 2000, but it was a stronger unit than the one behind the OHV. All V8 examples were equipped with a 4-speed heavy-duty automatic (shared with the F-150, Mustang, and Crown Victoria). On four-wheel drive versions, the four-wheel drive system was redesigned for the 1995 Explorer. In place of Touch Drive from the previous generation, ControlTrac was an electronically controlled full-time four-wheel drive system with a two-speed transfer case, with software controlling a multi-disc clutch (in place of a center differential). Along with traditional two-wheel drive and high and low-range four-wheel drive, "Auto" mode allowed software to maintain the amount of torque sent to the front wheels; if the front axle begins to spin slower, torque is shifted from the rear wheels to the front wheels until traction is achieved. Similar to TouchDrive, ControlTrac is dash-controlled, with a rotary selector for two-wheel drive (1995-1996, 2001-2003 Sports), auto (1997-2001), high range, and low range. The V8 models could come equipped with full-time an AWD system, without the 4x4 High-Range/Low-Range feature. The system required no driver input and torque distribution was entirely managed by a viscous clutch with a 40/60 split.

While visibly similar to its predecessor, many exterior panels from the 1995 Ford Explorer were changed, with only the roofline and the side doors carrying over. As part of the changes related to the redesigned front suspension, the entire front fascia was redesigned, with the Explorer gaining model-distinct styling. In a styling theme that would be used in several other Ford small trucks, the 1995 Explorer was given an oval grille; the headlamps were changed from rectangular to oval as well, wrapping into the fenders. Depending on trim, the grille and bumpers were painted gray (XLT), body color (Limited/Sport), or chromed. In contrast to the front fascia, the rear fascia saw relatively few changes, with the rear bumper nearly unchanged. Along with slightly reshaped taillamps (with amber turn signals), the 1995 Ford Explorer marked the debut of a neon CHMSL (center brake light).[10]