The newcomer will only break cover towards the end of 2006 but insiders say this sizzler will feature the previous M3's 3.2-litre engine.
This straight-six has a power output of 252 kW and will give the Z4 potent performance muscle.
Other changes for the M powered Z4 will include a wider rear track, stiffer suspension and bigger brakes.
As reported recently BMW is also working on a hardtop version of the Z4.
It is also expected that BMW could launch a facelifted version of the roadster at the upcoming Frankfurt Motor Show.