Introduced in September 1988 and produced until August 1995, the E34 M5 was produced in both sedan and station wagon ('Touring') body styles, the latter being the first M5 to be available as a wagon.

The E34 M5 is powered by the BMW S38 inline-six engine, originally with a displacement of 3.6 L (220 cu in) and an output of 232 kW (311 hp), later upgraded to a 3.8 L (232 cu in) engine rated at 250 kW (335 hp). This 3.8 litre version of the M5 was first seen by the public at the 1991 Frankfurt Motor Show, where the E34 M5 Touring also saw its debut.

In its last year of production for the M5, the transmission was upgraded from a 5-speed manual to the Getrag 420G 6-speed manual (which was also used by the 540i model).