Yes. If people are putting 2g housings in their 1g's, then it would only make sense it would work the other way around. It's not an upgrade what-so-ever, but it will bolt up.

Megaman said:

Will a stock 1g 02 housing bolt up to a stock 2g downpipe and t25? And since it's really rusted up, would it be ok to install it?

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Yes but the 1G is more restrictive in the WG passage so more a "downgrade" from a 2G.
They are all rusty as made of cast iron, just make sure no cracks.

The rusty appearance is normal, just because its rusty does not mean it is going to fail soon..notice a lot of exhaust parts look rusty. Honestly I wouldn't worry about it, but if you have the O2 sensor housing off, it'd be a good time to port it

Why would you want to do this?? If anything you are going to hurt performance.

CanadianTSi said:

Why would you want to do this?? If anything you are going to hurt performance.

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State ref