Under the new organisation of the British Army in 1881, The Durham Light Infantry Regiment was created, consisting of two regular (full-time) battalions (1st and 2nd), two militia (part-time) battalions (3rd and 4th), and five volunteer battalions.

The 2nd Battalion was created from the 106th Light Infantry Regiment, which had previously been known as the 2nd Bombay European Regiment, and the 106th Bombay Light Infantry.