1990 saw the introduction of the third-generation 3-Series, the four-door Sedan taking to the stage on a wave of elegance and new technology. On top of this, the dimensions of the body and the space inside the car had both grown considerably. A two-door variant followed in 1992, and this time it was every inch the graceful coupé. Just a few months later BMW unveiled two more sparkling additions to the line-up: the new Convertible and new BMW M3. The developers came up with another fresh concept innovation in 1994 with the introduction of the BMW 3-Series Compact. It was welcomed by drivers looking primarily for greater economy, but without the need to compromise on dynamic performance and comfort.

The new six-cylinder engines had two camshafts and four valves per cylinder. In the Coupé the powerplants featured VANOS variable camshaft control. This new technology improved torque development and reduced fuel consumption and emissions, and allowed the engineers to increase the engine's compression ratio. Two other newcomers to the range were the 325tds, powered by a six-cylinder diesel engine with turbocharger and intercooler, and the first four-cylinder turbodiesel under the bonnet of the 318tds. The turn of the year 1994/95 also brought a lighter aluminium crankcase for the six-cylinder units.