A noncomplete graph is
$2$-distance-transitive if, for
$i \in \{1,2\}$ and for any two vertex pairs
$(u_1,v_1)$ and
$(u_2,v_2)$ with the same distance i in the graph, there exists an element of the graph automorphism group that maps
$(u_1,v_1)$ to
$(u_2,v_2)$. This paper determines the family of
$2$-distance-transitive Cayley graphs over dihedral groups, and it is shown that if the girth of such a graph is not
$4$, then either it is a known
$2$-arc-transitive graph or it is isomorphic to one of the following two graphs:
$ {\mathrm {K}}_{x[y]}$, where
$x\geq 3,y\geq 2$, and
$G(2,p,({p-1})/{4})$, where p is a prime and
$p \equiv 1 \ (\operatorname {mod}\, 8)$. Then, as an application of the above result, a complete classification is achieved of the family of
$2$-geodesic-transitive Cayley graphs for dihedral groups.