The BMW X3 was initially criticized for its harsh ride, an austere, minimalist interior that relied heavily on obviously plastic components, and limited off-road usage, through its heavily road-biased chassis set-up. Critics also felt the car was overpriced; a basic 2.5i, which lacked cruise control or automatic headlights and had vinyl upholstery, exceeded $30,000 in the U.S. (Vinyl has never been offered in other markets). BMW sought to rectify these complaints in 2005, with various upgrades (see below). The X3 also disappointed some BMW purists by not being assembled at a BMW factory; instead, the car's production was outsourced to Magna Steyr, based in Graz, Austria. However, Magna Steyr has won numerous awards for quality and has been the highest rated car assembly factory in Europe. It has also manufactured - amongst others - European market Chrysler/Jeep products, the 4-Matic Mercedes E Class derivatives, and even Saab 9-3 convertibles.

The automotive press has provided mixed views of the X3. Jeremy Clarkson even said that the X3 was for people who are clinically insane after his road test of it. He also criticized it for its harsh ride, and pointed to the poor off-road ability. He got stuck multiple times because of deep mud and used summer tires. Automotive press generally liked xDrive capability, safe bottom for rough terrain and hill-descent control, but pointed to only real down side against typical off-road cars: missing gear reduction which allows to drive very slow on rough terrain without using clutch (on manual gearbox) or warming up gearbox (automatic gearbox).

The X3 3.0i won the Canadian Car of the Year Best New Sport Utility Vehicle award for 2005.