The L1 engine is based on the M47D20 TÜ2 single-turbo diesel engine from the 320d with 163PS (120kW) and 340Nm. The L1 engine was introduced in the E90 D3 in late 2005. It is the first production diesel engine to exceed engine output of 100hp/liter.

Uncharacteristically, engine block and internal parts are not modified. A new Garrett turbocharger is installed, as well as an intercooler sourced from the 330d and injectors from the 535d. Modifications are made to the intake and cooling package, as well as engine management changes. A custom exhaust is developed.