BMW is continuing development of its three-cylinder engine, which is mooted to be launched in the 1-series.
The engine is based on BMW's new common 500cc-per-cylinder design and uses direct injection and turbocharging.
A source told Autocar: "This is not an entry-level unit. It's a serious, refined, sporting engine with great CO2 figures."
BMW sources have told Autocar that the next 1-series has been engineered to cope with the unique noise and vibration of a three-cylinder engine.
BMW has had experience with three-cylinder units in its motorcycles, where reducing NVH is crucial.