Q. What are the requirements when replacing 2-wire receptacles?

A. The requirements are contained in 406.3(D)(3). Where no equipment grounding conductor exists in the outlet box for the receptacle, such as old 2-wire Type NM cable without an equipment grounding conductor, existing nongrounding-type receptacles can be replaced in accordance with (a), (b), or (c):
(a) Another nongrounding-type receptacle.
(b) A GFCI-type receptacle marked "No Equip¬ment Ground."
(c) A grounding-type receptacle, if GFCI protected and marked "GFCI Protected" and "No Equipment Ground."

GFCI protection functions properly on a 2-wire circuit without an equipment grounding conductor because the circuit equipment grounding conductor serves no role in the operation of the GFCI-protection device. See the definition of "Ground-Fault Circuit Interrupter" for more information.

Caution: The permission to replace nongrounding-type receptacles with GFCI-protected grounding-type receptacles doesn't apply to new receptacle outlets that extend from an existing outlet box that is not connected to an equipment grounding conductor. Once you add a receptacle outlet (branch-circuit extension), the receptacle must be of the grounding type — and it must have its grounding terminal connected to an equipment grounding conductor of a type recognized in 250.118, in accordance with 250.130(C).