At the launch of the E30 range in 1982, the 316 used a 1766 cc M10 fed by a carburetor and producing 66 kW (90 PS; 89 hp), this engine allowed BMW to offer a cheap, entry-level car in the range. The 318i had the same M10 engine, but with Jetronic fuel injection, pushing power to 77 kW (105 PS; 103 hp) while also improving fuel economy.

The 1987 "Series 2" update introduced a new four-cylinder SOHC engine, the 1796 cc (M40B18) with 85 kW (116 PS; 114 hp). This engine incorporated Motronic fuel injection . The 316 was replaced by the 316i, which used a 1596 cc M40B16, producing 75 kW (102 PS; 101 hp). This was not quite as torquey as the 66 kW (90 PS; 89 hp) 1766 cc M10 it replaced - nevertheless, it offered superior performance overall. In South Africa and perhaps some other markets, the old M10-powered 316 continued until 1991, gaining the new bumpers when the range was updated. The 316i model (and previous 316 model) was not sold in Australia, where the base model continued to be the 318i.

The 318iS coupe was released in 1989, soon followed by the 318i sedan and 318iC convertible. These models introduced a new engine, the chain-driven DOHC M42 1.8 L 16-valve engine w. This is the most modern engine available in the E30 range, incorporating the updated Bosch Motronic 1.3, hydraulic valve adjusters and four individual coil packs which resulted in a very high hp per litre as well as reasonable fuel economy (33mpg) and CO2 emissions (190 g/km). The excellent weight distribution of the 318iS & 318ic has led to frequent comparisons with the famous E30 M3. Nicknames include "mini M3" or "poor man's M3."

The M3 is powered by the BMW S14 engine, a high-revving motorsport engine.