The powertrain of the B5 S4 features a 2.7-litre twin-turbo ('biturbo') 90° third-generation V6 engine (Identification codes: AGB, AZB, APB). Details of the powerplant include a cast iron cylinder block with two lightweight aluminium alloy cylinder heads. The valvetrain includes 30 valves (five valves per cylinder), twin hybrid-driven (timing belt and roller chain) double overhead camshafts and variable valve timing for the inlet valves.
The intake air is pressurized by two parallel water-cooled BorgWarner K03-series turbochargers; the charged air is cooled by two side-mounted air-to-air intercoolers (SMICs). It displaces 2,671 cubic centimetres (163.0 cu in), and is rated to produce a motive power output of 195 kW (265 PS; 261 bhp) at 5,800 rpm, and generates 400 N⋅m (295 lbf⋅ft) of torque at 1,850 rpm. Engine management was by way of a Bosch Motronic ME 7.1 (7.0 in North America) electronic engine control unit (ECU), and helped it meet the European EU-3D emissions standard. In all US-market cars, the engine was detuned to meet US emissions regulations; output was reduced to 187 kW (254 PS; 251 bhp) and 350 N⋅m (258 lbf⋅ft)