This work employs high-quality Hubble Space Telescope (HST) Advanced Camera for Surveys (ACS) F606W and F814W photometry to correct for the differential reddening affecting the colour-magnitude diagram (CMD) of the poorly-studied globular cluster (GC) Palomar 2. Differential reddening is taken into account by assuming that morphological differences among CMDs extracted across the field of view of Palomar 2 correspond essentially to shifts (quantified in terms of δE(B − V )) along the reddening vector due to a non-uniform dust distribution. The average reddening difference over all partial CMDs is δE(B − V ) = 0.24 ± 0.08, with the highest reaching δE(B − V ) = 0.52. The corrected CMD displays well-defined and relatively narrow evolutionary sequences, especially for the evolved stars, i.e. the red-giant, horizontal and asymptotic giant branches (RGB, HB and AGB, respectively). The average width of the upper main sequence and RGB profiles of the corrected CMD corresponds to 56% of the original one. Parameters measured on this CMD show that Palomar 2 is ≈ 13.25 Gyr old, has the mass M ∼ 1.4 × 10 5 M stored in stars, is affected by the foreground E(B − V ) ≈ 0.93, is located at d ≈ 26 Kpc from the Sun, and is characterized by the global metallicity Z/Zo ≈ 0.03, which corresponds to the range −1.9 ≤ [F e/H] ≤ −1.6 (for 0.0 ≤ [α/F e] ≤ +0.4), quite consistent with other outer halo GCs. Additional parameters are the absolute magnitude M V ≈ −7.8, and the core and half-light radii r C ≈ 2.6 pc and R HL ≈ 4.7 pc, respectively.