The US E36 M3 left the factory with a clutch-type limited-slip diff — a 188mm medium-case unit at roughly 25% lock on a 3.15 final drive (the Euro 3.2 Evo uses the larger 210mm case at 3.23). It's a genuine LSD, not an open or viscous diff, so a healthy M3 already puts power down well.
What it is NOT is easily 'tuned up' in place — there's no factory adjustment to raise the lock or preload, so more aggressive behaviour means a rebuilt clutch pack or an aftermarket centre (Wavetrac, Quaife, OS Giken).
Check yours is alive the simple way: one rear wheel off the ground, turn it by hand.
- A working clutch LSD takes real effort and tries to drive the other wheel the same way
- If it spins free and light, the clutches are worn out
Always run the correct LSD friction-modifier oil, or even a good diff will chatter on tight, slow turns.