Transglutaminase 2 (TG2 or tissue transglutaminase) is a highly complex multifunctional protein that acts as transglutaminase, GTPase/ATPase, protein disulfide isomerase, and protein kinase. Moreover, TG2 has many well-documented nonenzymatic functions that are based on its noncovalent interactions with multiple cellular proteins. A vast array of biochemical activities of TG2 accounts for its involvement in a variety of cellular processes, including adhesion, migration, growth, survival, apoptosis, differentiation, and extracellular matrix organization. In turn, the impact of TG2 on these processes implicates this protein in various physiological responses and pathological states, contributing to wound healing, inflammation, autoimmunity, neurodegeneration, vascular remodeling, tumor growth and metastasis, and tissue fibrosis. TG2 is ubiquitously expressed and is particularly abundant in endothelial cells, fibroblasts, osteoblasts, monocytes/macrophages, and smooth muscle cells. The protein is localized in multiple cellular compartments, including the nucleus, cytosol, mitochondria, endolysosomes, plasma membrane, and cell surface and extracellular matrix, where Ca2+, nucleotides, nitric oxide, reactive oxygen species, membrane lipids, and distinct protein–protein interactions in the local microenvironment jointly regulate its activities. In this review, we discuss the complex biochemical activities and molecular interactions of TG2 in the context of diverse subcellular compartments and evaluate its wide ranging and cell type-specific biological functions and their regulation.