BMW had entered the American Le Mans Series with the standard E46 M3, using its naturally aspirated BMW S54 straight-six engine. The S54 produced competitive power figures in road car trim, but against the Porsche 996 GT3 RSR in ALMS competition the M3 struggled for pace. In 2000 the E46 M3 finished third in the GT championship, which prompted BMW Motorsport to develop an entirely new racing variant for the 2001 season.
BMW engineers designed a new 3,997 cc (4.0 L) V8 engine designated the P60B40, which was derived from BMW's existing V8 architecture but specifically engineered for racing use. In race configuration the P60B40 produced approximately 330 kW (443 hp), significantly more than the S54 six-cylinder. The engine was fitted with a dry sump lubrication system and mated to a six-speed sequential gearbox. The GTR used a variable locking limited-slip differential to manage the increased power output.
The E46 M3 GTR was introduced mid-season in 2001 and driven by Jorg Muller to victory in the ALMS GT category, claiming the championship for BMW. The car's dominant form triggered a significant controversy: rival teams disputed that the GTR was a genuine production model eligible under ALMS homologation rules, arguing instead that it was effectively an in-house prototype dressed in M3 bodywork.
The 2001 ALMS homologation regulations required that a car must be sold on at least two continents within twelve months of the relevant rules being issued. BMW stated that ten GTR road cars were available for sale, fulfilling this requirement. However, ALMS officials revised the rules for the 2002 season to require that 100 cars and 1,000 engines must be built to qualify without penalties — a production scale the GTR road car could not reach. BMW withdrew the GTR from ALMS competition at this point.
The M3 GTR later returned to competition in European events. In 2003 two cars were entered at the 24 Hours Nurburgring, run by Schnitzer Motorsport. The GTR won the Nurburgring 24 Hours outright in both 2004 and 2005, demonstrating the performance ceiling of the V8-engined machine in endurance conditions. The car also contested the Spa 24 Hours during this period.
To satisfy the 2001 ALMS homologation requirement, BMW produced a road-going version of the M3 GTR. The road car was shown publicly for the first time at Petit Le Mans at the end of the 2001 season. Like the race car, it was powered by the 4.0-litre P60 V8 engine, which was slightly detuned for road use from 331 kW to 285 kW (444 to 382 hp) at 7,000 rpm. The transmission was a six-speed manual gearbox, and the differential was the same variable locking unit as the race car.
The dry weight of the road car was 1,350 kg (2,980 lb), with weight reduction measures including carbon fibre front bumper, rear bumper, and rear wing. Top speed was approximately 295 km/h (183 mph). The road car was priced at 250,000 euros. When the ALMS changed its homologation rules at the end of the 2001 season, the road version project was stopped. Ten development units had been built, of which three were production-ready display cars that remain in existence.
The E46 M3 GTR became one of the most recognisable racing cars in gaming history after appearing as the central hero car in the 2005 video game Need for Speed: Most Wanted. The game featured a specific livery on the M3 GTR that became iconic within the driving game community. The car's association with the game persisted for decades, with enthusiasts recreating the livery in real life. Road and Track described the game's M3 GTR as so iconic that "fans still recreate the livery in real life."
In November 2024, BMW vinyl-wrapped the original 2001 ALMS GT-winning number 42 M3 GTR driven by Muller with the Need for Speed: Most Wanted livery, displaying it at the BMW Welt in Munich from December 2024 to January 2025.