A restyled interior came in 1996 along with the introduction of the C36. This new model allowed Mercedes to flex its muscles with a sport-tuned suspension and a 268-hp 3.6-L inline 6-cylinder engine. The 240-hp BMW M3 of the era now had a serious contender.
The remainder of the C-Class models stayed unchanged until 1997, when the C220 became the slightly more robust C230 at 162 lb-ft of torque instead of 155 - its horsepower remained the same at 148. Still it needed over nine seconds to find 100 km/h, so performance enthusiasts were required to move up-market to the carry-over C280. Speaking of moving up market the top-line C36 gained a few horsepower, now 276.
For 1998 the C280 received Mercedes' first V6, a 2.8-L unit once again with 194-hp. Torque actually decreased from 199 lb-ft to 195. New features included Brake Assist and side airbags as well as a BabySmart car seat detector. The biggest news was the wickedly quick 302-hp V8 powered C43, replacing the inline-6 C36. The only downside, it only came with an automatic transmission. As good as the new car had become, it still experienced initial hesitation during full acceleration, a problem that even continues today with the new supercharged C32. On the good side traction control became an option this year.
1999 was the banner year for the base model, receiving a 'kompressor' or supercharger for its 2.3-L 4-cylinder. Output was raised from 148 to 185 horsepower while torque improved from 162 to 200 lb-ft. What's more, Xenon headlights, leather seats, a 5-speed automatic transmission and traction control system were made standard on C-class cars.
Year 2000 brought the Touch Shift auto-manual transmission to all C-Class models while stability control was made standard. Mercedes' Telaid, a GPS communication system that is able to summon help if involved in an accident was introduced as standard equipment too.