The initial models were of the four-door saloon body style, followed by the coupé, convertible, wagon ("Touring"), and eventually hatchback ("Compact").

Development of the E36 began in 1981[5] and the exterior design was heavily influenced by aerodynamics, specifically the overall wedge shape, headlight covers and smaller wing mirrors.

The E36 chassis was all new, using the "Z-axle" multilink suspension proven in the 1989 BMW Z1, and designed with rear toe-in to minimize the oversteering characteristics of the preceding generation.

[20] The dashboard was designed to accommodate the passenger side airbag from the beginning, which limited the size of the glove compartment.

In North America, cars equipped with the "Winter Package" also have heated seats and side mirrors.

To retain a 50/50 weight distribution (on petrol models), versions fitted with the heavier, six-cylinder engines had the battery relocated to the trunk.

In late 1992 the M50TU versions added single-VANOS (variable valve timing), which increased torque (peak power was unchanged).

Alpina models also had special aerodynamic pieces, including an Alpina-branded front lip and rear spoiler.

Changes to the interior were also present in Alpina models, including new blue instrument panels, wooden trim, new seats and steering wheel.

The 3 Series Compact range of three-door hatchback models was introduced in 1993, based on a shortened version of the E36 platform.

The European model range had more variety than the North American and included diesel engines and the station wagon "Touring" body styles.

Local assembly of complete knock-down (CKD) kits was used for cars sold in Uruguay[29] (until 1991), Egypt, Mexico, and Thailand.

[30][31][32] The E36 was also built as CKD kits in the Philippines starting from 1994 up until 1997, where production halted due to the 1997 Asian financial crisis.

The 1998 24 Hours Nürburgring was won by a diesel-engined car for the first time – a BMW E36 320d, aided by its diesel engine requiring fewer fuel stops than rivals.