Development on the roadster began in 1991 and was led by Burkhard Göschel. The exterior was designed by Joji Nagashima, being completed in mid-1992 at 39 months before production and the design was frozen in 1993. Design patents were filed on April 2, 1994 in Germany and on September 27, 1994 in the US. The Z3 was introduced via video press release by BMW North America on June 12, 1995. Production began on September 20, 1995.
Development on the coupé model was run by a group of BMW engineers outside of work in their own time. The Z3 Coupé shares the same platform and parts with the roadster, but features a chassis-stiffening hatch area and is 2.7 times stiffer in comparison. The Z3 Coupé was unveiled at the 1997 Frankfurt Motor Show.
The Z3 was the first BMW model to be solely manufactured outside of Germany. It was manufactured in Greer, South Carolina.