Topochemical reduction of Sr3Co2O5Cl2 with NaH at 200 degrees C yields Sr3Co2O4Cl2, a phase consisting of infinite double sheets of corner-linked (CoO4)-O-II square planes stacked with SrCl rocksalt layers. At 298 K, the structure of Sr3Co2O4Cl2 is described in the tetragonal space group 14/mmm [a = 4.007(1) angstrom, c = 22.282(1) angstrom]; however, on cooling below 200 K, the structure undergoes a lattice distortion to adopt a structure with orthorhombic symmetry in space group Immm [a = 3.9757(5) angstrom, b = 4.0294(5) angstrom, and c = 22.147(3) angstrom at 5 K]. The structural distortion can be considered Jahn-Teller-like as it lifts the orbital degeneracy of the square planar, d(7), Co-II centers, demonstrating a strong coupling between the electronic configuration and the structural lattice of this oxychloride phase. On cooling below 50 K, Sr3Co2O4Cl2 adopts a canted antiferromagnetically ordered state. All magnetization data show that the local cobalt moment is much greater than would be expected for a simple spin-only S = 3/2 center, indicating a strong orbital contribution to the magnetic behavior.