Pretty good comparison test by edmunds.

http://www.edmunds.com/apps/vdpconta...8/pageNumber=1
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I haven't driven a 135i yet, but based on their comments I think I'd still go for the M3. Really the only thing the 135i has going for it over the M3 is the engine. An M car will always drive differently, and the suspension and steering are more important to the experience than the engine. A 135i Tii with a lsd might change that though.