The Vera Rubin Observatory Legacy Survey of Space and Time (LSST) is expected to process ∼10 6 transient detections per night. To use these transients for precision measurements of cosmological parameters and rates studies, it is critical to understand the detection efficiency, magnitude limits, artifact contamination levels, and biases in the selection and photometry. Here we rigorously test the LSST Difference Image Analysis (DIA) pipeline using simulated images from the Rubin Observatory LSST Dark Energy Science Collaboration (DESC) Data Challenge (DC2) simulation for the Wide-Fast-Deep (WFD) survey area. DC2 is the first large-scale (300 deg 2 ) image simulation of a transient survey that includes realistic cadence, variable observing conditions, and CCD image artifacts. We analyze ∼15 deg 2 of DC2 over a 5-year time-span in which artificial point-sources from Type Ia Supernovae (SNIa) light curves have been overlaid onto the images. We measure the detection efficiency as a function of Signal-to-Noise Ratio (SNR) and find a 50% efficiency at SNR = 5.8 averaged over all bands. The corresponding magnitude limits for each filter are: u = 23.66, g = 24.69, r = 24.06, i = 23.45, z = 22.54, y = 21.62 mag. The artifact contamination levels is ∼ 90% of all detections, corresponding to ∼ 1000 artifacts/deg 2 n g band, and falling to 300/deg 2 n y band. The recovered photometry has biases < 1% for magnitudes 19.5 < m < 23. We show that our DIA performance on simulated images is similar to that of the Dark Energy Survey difference-imaging pipeline applied to real images. We also characterize DC2 image properties to produce catalog-level simulations needed for distance bias corrections. We find good agreement between DC2 data and simulations for distributions of SNR, redshift, and fitted light-curve properties. Applying a realistic SNIa-cosmology analysis for redshifts z < 1, we recover the input cosmology parameters to within statistical uncertainties. Finally, we discuss further applications of this dataset and analysis, and we suggest pipeline improvements before LSST operations begins.