In 1985, a new version of the 2600 was released (although it was planned for release two years earlier). The new redesigned version of the 2600, unofficially referred to as the 2600 Jr., featured a smaller cost-reduced form factor with a modernized Atari 7800-like appearance. The redesigned 2600 was advertised as a budget gaming system (under $50) that had the ability to run a large collection of classic games. With its introduction came a resurgence in software development both from Atari Corp. and from a few third parties (notably, Activision, Absolute Entertainment, Froggo, Epyx, and Exus). The Atari 2600 continued to sell in the USAand Europe until 1991, and in Asia until the early 1990s. Its final Atari-licensed release was KLAX in 1990. Over its lifetime, an estimated 40 million units were shipped, and its video game library reportedly numbers more than 900 titles with commercial games released for this system all the way until 1991. In Brazil, the console became extremely popular in the mid-1980s. The Atari 2600 was officially retired by Atari Corp. on January 1, 1992,[citation needed] making it the longest-lived home video game console (14 years, 2 months) in video game history.

The system was promoted on a United Kingdom TV ad in 1989 in the run-up to Christmas, in which it claimed The fun is back!, although the games were very much dated compared to the Sega Mega Drive, Nintendo NES and Sega Master System which were the main interest at the time. The advertising campaign also used its price of under £50 as a selling point. However, despite this the games system still failed in competition to the more modern systems. The advert was also a re-dubbed version of the early original campaign in the United States.