Z3 was the first modern BMW roadster, as well as the first new BMW car assembled in the United States. BMW Z3 was introduced as a 1996 model year vehicle, shortly after being featured in the James Bond movie, GoldenEye. There were a few variants of the car before its production run ended in 2002, including a coupé version for 1999. It was manufactured and assembled in Spartanburg, South Carolina. BMW Z3 was replaced by the BMW Z4 introduced in late 2002 at the Paris Auto Show.

BMW Z3 was developed from the E36 platform of the BMW 3 Series. The resulting platform is sometimes referred to as the E36/7(roadster) or E36/8(coupé). The rear semi-trailing arm suspension from the E30 was used rather than the more sophisticated multilink suspension from the E36. At first, only the 1.9 L M44B19 straight-4 engine was offered, but its 138 hp (103 kW) was not up to buyers' expectations. Interior appointments too were not up to the standard of other BMW models, and the plastic rear window looked poor compared to the glass unit found on the much less expensive 1999 Mazda MX5.

In the USA market, the inline-4 motor was complemented by a larger straight-6 engine in 1997: the 2.8 L M52B28. This engine, similar to the BMW M52 in the 328i except with an all aluminum block and head, was especially desirable with its 189 hp (141 kW). The M Roadster (see below) appeared in 1998 with a 3.2 L S52B32 (North America) or more powerful S50B32 (International) I6, just as the four was retired. In 1999, the 1.9 L 4-cylinder engine was replaced with a 2.5 L straight-6 M52TUB25, producing 170 hp (130 kW). Due to marketing, BMW wanted to differentiate the 2.8 L engine from the 2.5 L engine, so it was badged 2.3 just like the 3-Series 323i, which also has a 2.5 L engine.

All of the engines were replaced when the car was facelifted for 2001. The range consisted of the 2.2 L M54B22 (available outside North America), 2.5 L M54B25, 3.0 L M54B30, and (for the M Roadster) 3.2 L S54B32. All three of these straight-6 engines lasted through the end of the car's run in 2002. Also updated was the car's interior appointments, though the plastic window remained.

BMW M Roadster (E36/7)

From 1998 to 2002, was produced the M Roadster BMW which included suspension upgrades and the engine from the BMW M3. The international 1998, 1999 and 2000 M roadster had the 3.2L S50 motor from the E36 M3 with quad exhausts. The USA models for this time frame had the less powerful S52 engine. The 2001 and 2002 models all had the S54 motor from the BMW E46 M3. There were also interior upgrades with additional gauges in the center console, lighted "M" shift knob, various chrome bits throughout the cockpit and sport seats as standard equipment. Exterior changes were larger wheels spaced further apart and more aggressive fenders than were installed on the regular Z3. Hardtops were available as an option. The BMW Z3 M was succeeded by the BMW Z4 M.

BMW Z3 Coupé (E36/8)

In addition to the E36/7 (roadster) of the Z3, BMW also released a coupé - E36/8 featuring a chassis-stiffening rear hatch area, though the Shooting-brake styling this gave was controversial. The coupé was available as the Z3 Coupé from 1999 to 2002 or as the BMW Motorsport-enhanced M Coupé from 1999 to 2002.

The Z3 E36/8 were only available with the largest 6-cylinder engine offered in the Z3 roadster: the 2.8 L in 1999 and 2000 and the 3.0 L in 2000 for Europe and in 2001 for the USA. The 1999 and 2000 M models were equipped with the 3.2 L S50 (S52 for North America) motor from the E36 BMW M3 car, while all the 2001 and 2002 models came with the S54 motor from the E46 BMW M3.