Launched at the Paris Salon in October 1992, the new model was initially only available as a Coupe before Convertible and Saloon derivatives came on stream in March and June of 1994 respectively. The basic E36 unibody construction remained unchanged as did the suspension format; MacPherson struts with coil springs at the front and a multi-link rear with semi-trailing arms and seperate springs and dampers. To this, BMW added their M Tuned suspension package that comprised progressive-rate springs with stiffer dampers that dropped ride height by 30mm. Also included were reinforced spring mounting points, modified track arms, reinforced front stub axles, thicker anti-roll bars and rear wheel bearings sourced from the 850i. Massive ventilated discs were over an inch larger than before (315mm front / 313 rear), the re-tuned Teves ABS and larger brake master cylinder radically improving stopping performance. Meanwhile, power was fed to the road via a limited slip differential and Michelin MXX3 tyres on ten-spoke 'M' 17-inch alloys, these measuring 7.5-inches across.

Other features of the S50 B30 motors were throttle bodies for each cylinder, heavy-duty valve springs, Bosch Motronic M3.3 engine management and a dual mass flywheel. With compression upped to 10.8:1 and a free-flow exhaust, BMW realised 286bhp at 7000rpm. There was also 236lb ft of torque at 3600rpm, most of which was available all the way up to 6000rpm. Opening the hood revealed 'BMW M-POWER' script on the crackle black cam covers, the engine being coupled to a close-ratio five-speed ZF gearbox. Meanwhile, the standard Coupe shell was equipped with an M Sport body kit to improve high-speed airflow. At the front was a deep spoiler with extended lip, body-coloured mesh grille and supplementary driving lights. Body-coloured side skirts featured a distinctive crossover sill treatment which combined with the deeper rear apron had the visual effect of lowering the car even more. Aerodynamically formed wing mirrors were unique to the new model, discreet M3 badging being positioned on the tailgate and exterior door mouldings. Compared to its predecessor that had featured attention-grabbing wings and blisters, the E36 M3 was a far more discreet proposition.

The Motorsport logo could also be found on three-spoke M-Technic II steering wheel, gear lever and instrument panel (the latter of which also featured red needles). Whereas regular 3-series' featured an economy scale, this was replaced with an oil temperature gauge for the M3, other detail changes including Motorsport-striped kick plates with the M3 logo and black headliner. Options included M-Style Double Spoke wheels, wider 8.5-inch rear wheels, a rear spoiler, full leather trim, a leather-covered sports steering wheel, air conditioning, metallic paint, heated front seats and cruise control. The front seats, sunroof and rear windows could also be ordered with electric operation whilst the optional four-spoke non-Motorsport airbag steering very soon became standard. Stereos were normally fitted by dealers. Production of right-hand drive M3's began in March 1993 and that September, an M airbag wheel became standard and a passenger airbag was added to the options list. Then, nearly two years after the Coupe had been unveiled at Geneva, BMW began producing a Convertible M3 in March 1994.

Three months after introducing the Convertible, BMW began producing a body style that had never previously been offered on the M3; a four-door Saloon. Production was underway by June 1994, the M3 Saloon using the same front and rear aprons as the Coupe, but with side sills that lacked the distinctive crossover treatment. The doors were steel and the suspension settings slightly softened for a more comfortable ride. Standard equipment on the Saloon included unique M Contour II type wheels, Nappa leather, front and rear centre armrests, chrome interior door release catches and map pockets. They also came with Burr walnut inserts for the centre console, gear knob and door handles. Weight rose by 75kg over the Coupe but the Saloon was nevertheless able to post identical performance figures. 'Vader' seats were optional and production of right-hand drive Saloon's started in October 1994.

Because the standard M3 engine wouldn't pass US emissions regulations without some massive investment, US M3's got special S50 engines with new cylinder heads that more closely resembled the standard production M50 unit. Output dropped to 240bhp at 6000rpm with 225lb ft of torque at 4250rpm. These cars came with air conditioning as standard along with leather trim, a 10-speaker stereo, driver and passenger airbags, a third brake light, metallic paint and an economy gauge instead of the standard M3's oil temperature gauge. From December 1994 BMW started manufacturing the US-spec M3 with a ZF five-speed automatic gearbox and also introduced a Luxury Pack at the same time. This basically included the side sills, wheels and interior from the M3 Saloon. Production of both versions stopped in January 1996 after 8515 manual cars had been completed and 1705 automatics.