The film features Jigsaw being apprehended by the police, but trapping the arresting officer in one of his own games while showing another game of eight people — including the officer's son — in progress on TV monitors at another location. It also explores some of John Kramer's backstory, providing a partial explanation of his reason for becoming Jigsaw.
Informant Michael Marks awakens in a room with a spike-filled mask locked to his neck. A videotape informs him that in order to unlock the device, he must cut into his eye to obtain the key, which has been surgically implanted and sealed behind it. He sets off the timer and finds the scalpel, but cannot bring himself to retrieve the key and is killed after sixty seconds when the mask closes.
At the scene of Marks' game, Detective Allison Kerry finds a message for her former partner, Eric Matthews, and calls him in. Despite not wanting to be involved with the case, already dealing with a divorce and estrangement from his son Daniel, Eric reluctantly joins Kerry and Sergeant Rigg in leading a SWAT team to the factory which produced the lock from Marks' trap. There they find and apprehend John Kramer, the Jigsaw Killer, who is weak from cancer. He indicates several computer monitors showing eight people trapped in a house; arsonist Obi Tate, his only known survivor Amanda Young, business man Gus Colyard, gangster Jonas Singer, Laura Hunter, drug dealer Xavier Chavez, prostitute Addison Corday, and Daniel. A nerve agent filling the house will kill them within two hours, but Kramer assures Eric that following his own game, simply sitting and chatting with Kramer, will see his son Daniel returned to him unharmed. At Kerry's urging, Eric agrees in order to buy time for the tech team to arrive and trace the video signal.
The victims are informed by microcassette recorder that antidotes are hidden throughout the house; one is in the room's safe, and a cryptic clue is provided. Xavier ignores a warning note and uses a key on the door, which fires a bullet through the peephole and Gus' eye, killing him. They search the house for more antidotes after the room lets them out, with no success: Obi, who is revealed to have helped with the abductions, is forced into a furnace to obtain two antidotes inside, but inadvertently activates the trap and is burned to death before the others can save him, destroying the antidotes; In the next room, Xavier throws Amanda into a syringe-filled pit intended for himself, and though she is able to retrieve the key, he is unable to unlock the steel door behind which the antidote sits before the timer expires and he leaves out of frustration. Throughout the game, they discuss connections between them and determine that each has been jailed before; the sole exception is Daniel, who has nonetheless been arrested before.
Meanwhile, Kramer passes the time with both idle and cryptic chat, eventually telling Eric that his survival of a suicide attempt after his diagnosis is the true reason for his games. With the little time left to him, he wants to inspire in others the new appreciation for life he had found. Eric, not interested in any of this, runs out of patience and returns to the monitors. He destroys several of Kramer's documents and sketches at Kerry's suggestion, but fails to provoke Kramer. As the tech team arrives, Kramer reveals the connection between the victims: Eric has framed all of them for various crimes, and Daniel will be in danger if his identity is discovered.
Having left the others, Xavier returns to the safe room and finds a colored number on the back of Gus's neck. After realizing the answer to the clue, he kills Jonas with a spiked bat for his number after a brief fight and begins hunting the others. Laura succumbs to the nerve agent after finding the clue revealing Daniel's identity. Addison and Amanda abandon him, but Amanda returns after finding Jonas' body. Addison finds a glass box housing an antidote, but her arms become trapped in the arm holes which are lined with hidden blades, and Xavier leaves her to die after reading her number. Amanda and Daniel find a tunnel in the safe room which leads to a dilapidated bathroom with two rotting corpses. Daniel collapses inside just before Xavier finds them. Amanda notes that he can't read his own number, and he cuts the skin from his neck. As he approaches, Daniel, who feigned his collapse, jumps up and slashes his neck with a hacksaw, killing him.
Having seen Xavier chasing his son, Eric brutally assaults Kramer and forces him to lead him to the house. Kramer's sitting area is revealed to be a lift, which they use to leave the factory. The tech team tracks the video's source and Rigg leads his team to a house, where they find VCRs playing previously recorded images. As Kerry realizes the game took place before they found Kramer, the timer expires and a large safe opens, revealing Daniel bound and breathing into an oxygen mask. Eric enters the house alone and eventually locates the bathroom, where he is attacked by a pig-masked figure. He awakens shackled at the ankle to a pipe; a tape recorder left by Amanda reveals that she is Kramer's accomplice and intends to continue his work after he dies. Amanda appears in the doorway and seals the door, leaving Eric to die. Outside, Kramer hears Eric's screams and slowly smiles, satisfied that his master plan worked perfectly.
Saw II was immediately green-lit after Saw's successful opening weekend a year earlier. Producers needed a script for a sequel but James Wan and Leigh Whannell, director and writer of Saw, were working on Universal Pictures's Dead Silence. Music video director Darren Lynn Bousman had just completed a script for his first film The Desperate, and was trying to sell it to studios but was getting reactions that the script was very similar to Saw. A German studio eventually approached him with an offer to produce the film for $1 million. Just as they were looking for a cinematographer, the American cinematographer David A. Armstrong, who had worked on Saw, arrived on the scene and suggested showing the script to Saw producer Gregg Hoffman. Hoffman read the script and called Bousman wanting to produce "The Desperate". After Hoffman showed the script to his partners Mark Burg and Oren Koules, the two decided that "The Desperate" was the starting script they needed for Saw II and two months later, Bousman was flown to Toronto to direct.
Whannell polished the script, with input from Wan, in order to bring it into the Saw universe, but kept the characters, traps and deaths from "The Desperate" script. Bousman said, "But you could read the script for "The Desperate" and watch Saw II, and you would not be able to draw a comparison". Wan and Whannell also served as executive producers. All the previous film's crew members returned: editor Kevin Greutert, cinematographer Armstrong, and composer Charlie Clouser. This was to be Hoffman's last film. He died unexpectedly on December 4, 2005.
Only those key cast and crew members who were involved in the film's ending were given the full script; the rest received only the first 88 pages. If a particular page was rewritten, the old page was shredded. Members were also required to sign confidentiality agreements requiring them not to release any plot details. Reportedly, "four or five" alternate endings were shot in order to keep the ending a surprise. Bousman gave the actors freedom to change dialogue in the script. He said that 95% of the time, the actors went by the script, with about 5% being adlibs, which he said "made all of the difference in the world". Hoffman said in an interview with Fangoria that they listened to fans' suggestions. For instance, instead of only showing the aftermath of a character violently dying in a flashback, they would allow it to unfold as it happened. This was in contrast to Saw, in which most of the violence was implied off-screen.
Saw II was given a larger production budget of $4 million, compared to Saw's budget of a little over $1 million. The marketing budget was an additional $2 million. The first shot, which involved shooting police cars and a SWAT van driving around the industrial docklands outside the soundstage, was filmed on April 29, 2005 in Toronto. After two months of pre-production, principal photography took place over 25 days at Toronto's Cinespace Film Studios from May 2, 2005 to June 6, 2005. The ending was filmed on May 25 and 26. The music and sound was recorded in July and Saw II was locked on July 16. It was completely finished by September 9. Visual effects were performed by C.O.R.E. Digital Pictures and post-production services were provided by Deluxe.
David Hackl, the film's production designer, took three weeks to construct 27 sets on a single sound stage. The puppet Billy, used in the series to give instructions to Jigsaw's victims, was originally created by Wan out of paper towel rolls and papier-mâché. Given the larger budget for the sequel, Billy was upgraded with remote-controlled eyes and a servo-driven mouth. In one trap, "The Needle Room", Smith's character Amanda is thrown into a pit of needles to find a key. In order for this to be done safely, four people, over a period of four days, removed the needle tips from syringes and replaced them with fiber optic tips. They modified a total of 120,000 fake needles. However, this number was insufficient and the pit had to be filled with styrofoam and other materials to make it appear to have more needles. The needles that were apparently stuck into Smith were actually blunted syringes stuck into padding under her clothing. For certain shots, a fake arm was used.
Bousman came up with an idea whereby a character's hands would get stuck in some sort of vessel and this resulted in the "Hand Trap". It proved to be a challenge but after much discussion, Hackl, property master Jim Murray and art director Michele Brady came up with a suitable design. They arranged a glass box suspended by chains from the ceiling which contained a hypodermic needle with the antidote and which had two hand-holes on the underside. As soon as Vaugier's character Addison put her hands into the holes razor blades would close in on her hands and any attempt to withdraw from the trap would cause her to bleed to death. In order for the trap to be used safely, the prop builders made the handcuffs move inside the box and fake blades that would retract from the actress's hands, thus allowing her to slide her hands out. Hackl subsequently commented that the character did not have to put her hands into the trap as there was a lock with a key on the other side box that would have opened the contraption.
The original idea for the "Furnace Trap" came from the house having been a crematorium at some point, but this would have involved turning the house into a funeral parlor, so it was instead decided that the furnace would be part of the house's boiler system. The furnace was visualized in the form of a computer model so that Bousman could better understand how shots could be filmed. Using the computer model as a guide, the furnace was constructed in three days using cement board and tin with removable sides and top so Timothy Burd (Obi) could be filmed crawling inside. The furnace produced real flames and, in place of Burd, a stunt man using a fire-retardant gel crawled into the fire.
Saw II was released in New Zealand, the United States, and the United Kingdom on October 28, 2005; and November 17, 2005 in Australia. The original teaser poster showing two bloody, severed fingers was rejected by the Motion Picture Association of America. Since the poster was already released and managed to "slip by" the MPAA, they issued a release stating the poster was not approved and was unacceptable; Lionsgate removed the poster from their websites. The image was used instead for the film's soundtrack cover. Lionsgate held the second annual "Give Til It Hurts" blood drive for the Red Cross and collected 10,154 pints of blood.
The Saw II soundtrack was released on October 25, 2005 by Image Entertainment. The video for "Forget to Remember" was also directed by Bousman.
Saw II was released on DVD, VHS, and Universal Media Disc on February 14, 2006 through Lionsgate Home Entertainment. The DVD debuted as number one selling 2.5 million units in its first day. It went on to sell 3.9 million units its first week, becoming the fastest selling theatrical DVD in Lionsgate's history.
On October 24, 2006, an Unrated Special Edition was released, while an Unrated Blu-ray edition was also released with various special features on January 23, 2007.
Saw II opened with $31.7 million on 3,879 screens across 2,949 theaters. The three-day Halloween opening weekend set a Lionsgate record. It became at the time, the widest release for Lionsgate and one of the best opening weekends for a horror sequel. For its second weekend it fell 47% making $16.9 million. The film was closed out of theaters on January 5, 2006 after 70 days of release.
Saw II opened in the United Kingdom with $3.8 million on 305 screens, 70% larger than the first instalment. It opened in Japan on 67 screens with $750,000. Opening to $1.3 million on 173 screens it was the number one film in Australia. The film grossed $87 million in the United States and Canada and $60.7 million in other markets for a worldwide total of $147.7 million. The film is the highest-grossing film of the Saw series and Lionsgate's fourth highest-grossing film in the United States and Canada. According to CinemaScore polls, 53% of the audience were males under 25 years of age. The poll also indicated that 65% of the audience were familiar with the first film.
The film received generally mixed reviews from critics, who praised the acting, particularly the performances of Bell and Wahlberg, while criticizing the gruesome nature of the story. Review aggregator Rotten Tomatoes reports that 36% of 117 critics have given the film a positive review, with a rating average of 4.6 out of 10. The site's consensus was, "Saw II is likely to please the gore-happy fans of the original, though it may be too gruesome for those not familiar with first film's premise". Metacritic, which assigns a weighted average score out of 100 to reviews from mainstream critics, gives the film a score of 40 based on 28 reviews.
Robert Koehler of Variety gave the film a negative review, saying "cooking up new Rube Goldberg torture contraptions isn't enough to get Saw II out of the shadow of its unnerving predecessor". Gregory Kirschling of Entertainment Weekly gave the film a B minus, saying "Saw II is just barely a better B flick than Saw" and that both films are "more clever and revolting than they are actually chilling". He praised Bell's performance as Jigsaw, saying "As the droopy-lidded maniac in the flesh, Tobin Bell is, for all the film's gewgaws, Saw II's sturdiest horror, a Terence Stamp look-alike who calls to mind a seedy General Zod lazily overseeing the universe from his evildoer's lair". He ended his review: "Where Saw II lags behind in Saw's novelty, it takes the lead with its smoother landing, which is again primed to blow the movie wide open, but manages a more compelling job of it than the original's cheat finish".
Kevin Crust of the Los Angeles Times gave the film a positive review, calling Saw II a "worthy follow-up to its grisly predecessor". He said the story was "much more focused on an endgame than the original film. There are fewer credibility gaps and there are plenty of reversals to satisfy fans". He criticized the use of numerous flashbacks, saying that it "rob[s] us of the pleasure of actually remembering for ourselves". Laura Kern, writing for The New York Times, gave it a mixed review, saying that Bousman "delivers similar hard-core, practically humorless frights and hair-raising tension, but only after getting past a shaky beginning that plays more like a forensics-themed television show than a scary movie" and called Greutert's editing "crafty". She called the sequel "more trick than treat" and that it "doesn't really compare to its fine predecessor - though it still manages to be eye-opening (and sometimes positively nauseating) in itself". Empire's Kim Newman gave the film three out of five stars. He said that the film improves upon Saw's "perverse fascination with Seven-style murders and brutally violent puzzles" and that Jigsaw's intellectual games make "Hannibal Lecter look like the compiler of The Sun's quick crossword". He ended his reviews saying, "Morally dubious it may be, but this gory melange of torture, terror and darkly humorous depravity appeals to the sick puppy within us all".
Tobin Bell was nominated for "Best Villain" at the 2006 MTV Movie Awards for his role as Jigsaw, though the award went to Hayden Christensen for his role as Darth Vader in Star Wars: Episode III – Revenge of the Sith.