The third generation S3 is powered by a 2.0-litre TFSI petrol engine, with an output of 221 kW (300 PS; 296 bhp). It features new pistons with stronger bolts and new rings, as well as reinforced connecting rods with new mounts transferring the power to the crankshaft. The cylinder head is made of a new lightweight aluminium alloy designed with high strength and temperature resistance in mind. The engine is capable of delivering 380 Nm from 1,800–5,500 rpm, with its limit being at 6,800 rpm. The 4 cylinder engine has a combined fuel economy of 40.4 mpg manual (40.9 mpg S Tronic).

The engine weighs in at 148 kilograms (326 lb), 5 kilograms (11 lb) lighter than the previous generation. The S3 is capable of 0–100 km/h (0–62 mph) in 5.2 seconds when equipped with a manual transmission (4.9 when using the S tronic) and has an electronically limited top speed of 155 miles per hour (249 km/h).