With the introduction of the E30 3-series, Alpina phased out the previously popular four cylinder engines and focused their efforts on the small-block six-cylinder models. All of these cars were based on the same platform with different versions of the same basic engine.

In 1986, BMW introduced the 190hp E30 M3. This meant the C1 2.5 was no longer competitive. Alpina responded by introducing the C2 2.7 with 210hp; this was achieved by increasing the stroke by using the crankshaft of the 325e.

In 1987, Alpina also introduced the C2 2.7 Allrad. This was the first 4WD Alpina model.
Additionally, the C2 2.7 Katalysator with catalytic convertor and 204hp was introduced.

Despite its high price, the C2 2.7 was popular and featured in many magazines tests – often in conjunction with the BMW M3. The C2 2.7 resulted in a number of spin-off models including the Japan-only B6 2.7 and the 325iS model for BMW South Africa.

Between 1986 and 1988, in total 108 examples of the C2 2.7 and 52 examples of the C2 2.7 Katalysator were produced.