The 1996–1999 model years had displacement bumped up to 3.2 litres, still with 240 bhp (179 kW; 243 PS), but torque increases to 320 N·m (240 lb·ft) which is the same S52B32US engine used in the early M Roadster and M Coupe. The manual gearbox remains a 5-speed despite the European versions being upgraded to 6-speed. It was also available as a saloon starting in model year 1997, and as convertible in 1998. Production of the saloon was halted in 1998, while the other models continued until 1999.

US sales figures include a total of 18,961 coupés, 7,760 saloons and 6,211 convertibles.

Other notable differences between North American and their European counterparts were as follows: Floating rotors were standard on the Canadian and European cars, but absent from the American variations. As well, the differential and rear axles on the North American cars were of lighter duty builds than the Euro cars.

All late model M3s received subframe re-inforcements and more aggressive front end suspension geometry due to the differences in caster and camber yielded by top hat design and lower control arm bushings.

The E36 M3 GTR is the road-going version of the competition machine built to compete in the 1994 ADAC German GT Cup Touring Car series. Essentially a race car with license plates.