“ Although they bear some resemblance to the Sectoids first encountered during the invasion, their genetic structure now includes human DNA. They are stronger than ever, with an even greater psionic potential. ”
–Dr. Tygan upon discovering the first Sectoid

Description

Using an infusion of human DNA, the Sectoid has grown into a much more imposing form than when it was first encountered. They are significantly taller than their Enemy Unknown versions, and now have a visible mouth with teeth. They are still fairly thin though, and their chest still glows. Sectoids use wrist-mounted blasters that are similar to the Plasma Pistols of the original Sectoids, but smaller and seemingly designed for use on the arm instead of merely mounted there. The blasters are handled by the Sectoids in a similar fashion to the original Sectoid Commanders, using them as "last-resort" weaponry when psionic chances are too low or impossible. Sectoids have a medium amount of HP, but no armor.

Abilities

Mindspin: A "roulette-wheel" type attack with a variety of different effects, potentially including mind-control.
Psi-Panic: Dominates the will of a target, attempting to force the target to panic.
Psi-Disorientation: Dominates the will of a target, attempting to disorient the target.
Mind Control: Dominates the will of a target, controlling its actions until the Sectoid or the target is killed.
Psi-Reanimate: Summons a Psi Zombie from the corpse of a humanoid target. The Psi Zombie is able to move around independently, but will die if the Sectoid is killed or afflicted with a turn-denying effect.

Tactical information

Takes +3 damage from melee weapons, effectively doubling Tier 1 sword damage, thus making them ideal targets for Rangers and Templars.
Flashbangs and other disorienting effects will cause psi-controlled characters to become disconnected from the Sectoid - this also causes Psi-Zombies to instantly die.
In the early game, Sectoids are always deployed as pod leaders followed by ADVENT. Later they will appear in pods made entirely of Sectoids or as support troops for other aliens. This change starts in May (June on Legend difficulty), but both types coexist for roughly one month.
Sectoids prefer using psionic abilities over shooting in most cases, but their psionics cannot directly cause damage. As such, on the turn they are revealed, they can generally be de-prioritised in favour of other enemies that are more likely to shoot at and wound XCOM soldiers. Sectoids which have raised zombies or mind-controlled soldiers, however, should be high-priority targets as the Sectoid's minions will be able to attack on its next turn.
Sectoids are likely to take flanking shots with their plasma pistol if they can. They may reposition to do so, but will avoid getting themselves flanked in the process. Besides flanking, Sectoids will only fire their pistol if they are disoriented or if both of their psionic abilities are otherwise unusable (such as when both abilities are on cooldown, or when there are no valid targets for their psionics). They may also fire if another Sectoid has already acted on their turn.
Consider equipping a Grenadier with a Mindshield and Flashbang Grenade specifically to combat Sectoids. Their immunity to panic and mind control, along with the ability to Disorient Sectoids in order to break panic and mind control for allies along with killing psi-zombies is invaluable early on in the game.

Trivia

Like several other creatures of XCOM 2, the new design of the Sectoid is a throwback to the classic X-COM: UFO Defense. The most evident characteristics are the more humanoid posture, greater resemblance to the classic "grey aliens" and addition of facial features. The Sectoid also incorporates certain parts of the Enemy Unknown design, such as the glowing chest and wrist-mounted weapon.
If a mind-controlled Sectoid revives a corpse, the resulting zombie will stay alive and be friendly even if the Sectoid escapes mind-control or dies. Zombies count as actual soldiers (missions involving mandatory evac cannot be finished until friendly zombies are killed as they cannot be evacuated) and their deaths reduce the score of missions.
In the War of the Chosen expansion, the Psi strength of Sectoids is reduced to 40 on Rookie difficulty only. On Veteran+, Psi strength is 90, which virtually guarantees a successful psionic attack when without a Mindshield due to how Will has been reworked, even on Colonel ranked soldiers. This may be a developing oversight.
As stated in a "NotDog" commercial in XCOM: Chimera Squad, hot dogs and chicken eggs are poisonous to Sectoids.