A two-year old child will have more difficulty adjusting than older children will because their needs are still great. And trying to make a two-year old understand how much care a baby requires will also be difficult for them to grasp. This is particularly true if they have been called 'baby', are still in a crib and possibly may even continue to be having a bottle.
Children should be prepared well before the birth of a new baby. They should be told early, be put into a big boy/girl bed well before the baby is born if they are still in a crib, be weaned from the bottle if they still have one and be reminded what a big boy/girl they are. They can be encouraged to be a big helper when the new baby arrives and the benefits of being an older brother or sister could be pointed out to them.
It will be important for them to have been included in the preparations for the arrival of the new baby. Perhaps they could help prepare the room for the new baby in ways they are capable of, even if it is just helping to place a book or toy. They may wish to 'lend' their new baby brother or sister one of their stuffies until he/she gets toys of their own. They may also want to sing or talk to their new baby brother or sister before they are born. This will help them feel more connected to the baby.
They can be part of the process in preparing for the new baby. Ways that this can be done is they can help choose the clothes the baby will wear home from the hospital, and what clothes they will wear to meet their new brother or sister. Getting a gift that they can give to the new baby will be a good idea as will getting a gift that the new baby can 'give' to the older child. When my second child was born, I gave my daughter a doll so she'd have a baby of her own to fuss over. As each of the other children were born, I gave appropriate gifts to all of the older children.
Reading books with the older child, or children, or watching videos about the arrival of a new baby or about being a big brother or sister also helps. Of course a child's personality will have a lot to do with how they will adjust and react to the new baby. Also, the age of the child when a new baby arrives on the scene will make a difference too.
Be aware of the older child's feelings. Does he/she feel that mommy or daddy love the new baby more. If this is the case, extra time should be spent with the older child so they don't feel like they've been replaced by the new addition.
It is very important that the older child accepts and welcomes the new baby. If not this could cause problems between the two siblings in the future. If they feel that the new baby usurped their position in the family, they will feel resentment. However, if they feel just as important as they always did, they will happily welcome the new addition.