Two-dimensional (2D) van der Waals (vdW) materials, featuring relaxed phase-matching conditions and highly tunable optical nonlinearity, endow them with potential applications in nanoscale nonlinear optical (NLO) devices. Despite significant progress, fundamental questions in 2D NLO materials remain, such as how structural distortion affects second-order NLO properties, which call for advanced regulation and in situ diagnostic tools. Here, by applying pressure to continuously tune the displacement of Nb atoms in 2D vdW NbOI2, we effectively modulate the polarization and achieve a 3-fold boost of the second-harmonic generation (SHG) at 2.5 GPa. By introducing a Peierls distortion parameter, λ, we establish a quantitative relationship between λ and SHG intensity. Importantly, we further demonstrate that the SHG enhancement can be achieved under ambient conditions by anionic substitution to tune the distortion in NbO(I1-xBrx)2 (x = 0-1) compounds, where the chemical tailoring simulates the pressure effects on the structural optimization. Consequently, NbO(I0.60Br0.40)2 with λ = 0.17 exhibits a giant SHG of over 2 orders of magnitude higher than that in monolayer WSe2, reaching the record-high value among reported 2D vdW NLO materials. This work unambiguously demonstrates the correlation between Peierls distortion and SHG property and, more broadly, opens new paths for the development of advanced NLO materials by manipulating the structure distortions.