The BMW 320d Efficient Dynamics saloon will emit 109g/km and average 68.9mpg when it goes on sale in January 2010, it was announced at the Frankfurt motor show.
It is powered by a 161bhp 2.0-litre diesel engine with 265lb ft of torque, giving it a 0-62mph time of 8.2sec and a top speed of 137mph. Acceleration from 50-75mph in fifth gear takes 9.6sec, according to BMW.
As a result of its emissions, it will cost £35 a year in VED road tax and attract a 13 per cent benefit-in-kind rating.
Changes made to achieve these economy figures include a modified engine construction, a longer rear axle transmission ratio, lowered suspension and the use of specially designed aerodynamic alloy wheels with Michelin EnergySaver tyres.
It also has a dual-mass flywheel with springs between the two parts to help smooth out any engine vibration through the drivetrain, plus centrifugal pendulum absorbers to improve smoothness further. BMW says the improvements these bring should encourage the driver to use a higher gear more often.