Led by manager Trevor Francis, the team repeated the previous season's fifth-place finish in the Football League First Division to qualify for the play-offs for a second consecutive season, but suffered another semi-final defeat, this time to Preston North End, losing 4–2 on penalties after drawing 2–2 over two legs.

Liverpool took the lead in the 30th minute through Robbie Fowler, but Birmingham equalised in the last minute of normal time with a Darren Purse penalty.

The top scorer for the season was Geoff Horsfield, with twelve goals in all competitions, of which seven were in the League; Marcelo also scored seven league goals.

French apparel manufacturers Le Coq Sportif remained Birmingham's kit suppliers for the third season in a row, and introduced a new kit for the season.

Auto Windscreens remained the kit sponsors, also for the third consecutive season.