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The E60 M5 was introduced in 2005. It has a naturally aspirated 5.0 L BMW V10 S85 engine redlining at 8250 rpm and developing a peak output of 500 SAE hp (507 PS, 373 kW) with 383 ft·lbf (519 N·m) of torque. Unlike some other BMW engines which utilize Valvetronic to infinitely vary valve lift to eliminate the throttle plate, this engine has 1 individual throttle body per cylinder. This gives it quicker response. Other key features include a stiffened aluminum chassis and a 7-speed SMG III manual transmission.

The BMW M5, along with the new M6, were designed to use the new SMG III electrohydraulic manual transmission. The transmission, while responsive at the track, has been criticized for its general lack of smoothness in everyday driving. In October 2006 BMW announced that a 6-speed manual transmission would be available in North America based on suggestions from the motoring press. Unfortunately, this gearbox reduces acceleration performance slightly. The 6-speed manual M5 was marginally slower, since the stability control cannot be disengaged as per the SMG version. The SMG III includes the "Launch Control" feature, which allows maximum performance standing starts automatically. However, the US spec vehicles have a reduced rpm to prevent vehicle damage and abuse.
E60 M5 V-10
The M5 features several F1 inspired engine and transmission controls including launch control, dynamic stability control, and the option of changing to either automated or manual as well as the speed at which shifts are completed (there are 11 shift programs in total forming what BMW calls Drivelogic). Manual shifting can be done with either a floor shifter or the steering column-mounted shift paddles (another F1-inspired feature), both of which are fitted to all SMG M5s. The floor shifter is the type used on manumatic transmissions; tipping it backward (toward the "+") shifts up, while a forward tip (toward the "-") shifts down. The shifter can be moved to the left to access neutral and reverse. The car also features a "power" button on the steering wheel (labeled "M") which offers access to three modes: P400 (limiting the engine to 400 hp (300 kW) for daily driving use), P500 (unleashes the full 507 hp) and P500 S (for full power and sharper throttle response, selectable only from the "M Drive Settings" in the iDrive menu). P400 is the default start-up mode, the P500 modes are preselected using i-Drive and then activated from P400 using the "M" button.

Other than a firm ride, the E60's criticisms are excessive fuel consumption, and the general design criticisms of the Chris Bangle E60 body. Recent developments by Audi, specifically the production of the more powerful Audi RS6(572 bhp), rivalling the M5, has inspired BMW to go back to the drawing board. The 2011 M5's power output is expected to hit the 600+ bhp mark,up from its current 507 bhp.

Frontal fog lights are unavailable for the E60 M5: The amount of air required by the engine forces the space normally occupied by the front fog lights under the bumper to be reallocated for air intakes.

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