It took place between 11 and 17 March 1996 in Portugal with Norway winning the event for the second time in its history, defeating Sweden, 4–0 in the final-game.

[1] China, Iceland and Russia were all invited to appear in the Algarve Cup for the first time replacing Italy, the Netherlands and the United States.

Russia and Iceland faced each other in the fifth place deciding match and with the score level after normal time and an added period of sudden death extra-time, contested the outcome with a penalty shootout.

China reached the third place play-off in their first appearance at the Algarve Cup and defeated Denmark to take the bronze medal.

An all Scandinavian final saw 1995 FIFA Women's World Cup winners Norway beat Sweden 4–0 and become champions for the second time in the competition's history.