How to Adjust E36 Headlights

1. Level the vehicle properly by filling the gas tank completely, taking everything out of the trunk and seats that doesn't normally ride along in the car, and inflating all four tires to the psi indicated on the side walls of the tires. You should also have a person sitting in the driver's seat of the vehicle while you actually adjust the headlight bulbs, so recruit a friend to help you with the rest of the steps.
2. Look for an appropriate place to calibrate your headlights. The ideal setting will have a flat, level driving surface in front of a flat, vertical wall. You will need to park your E36 about 25 feet back from the wall, so make sure that there's enough room to back that far up.
3. Wait until it's dark enough to see the headlights reflected on the wall, then drive to your selected spot. Pull all the way up to the vertical wall until your front bumper almost touches it, then put on the parking brake and straighten out the front wheels.
4. Get out of the car and bring the masking tape with you. Because of the contouring on the front end of the E36, the lenses of the headlights should only be a few inches away from the wall. Tear off two small squares of masking tape and place them on the wall directly in front of the center points on each of the headlight lenses. The center point of the headlight lenses will always be marked by some sort of symbol, but the specific size and shape of the symbol depends on what model year your E36 is and whether or not you've had aftermarket headlight assemblies installed.
5. Make sure your front tires are perfectly straight, then get back in the car and back straight up about 25 feet.
6. Put the parking brake on, get out of the car and use your tape measure to see if the front end of the car is 25 feet back from the wall. Based on your measurement, make any adjustments necessary until the car is almost exactly 25 feet away.
7. Put the parking brake back on, turn on the headlights and leave the engine running. If you found someone to sit in the driver's seat while you adjust the headlights, have them sit in the seat now.
8. Look at the headlight beams shine on the wall. You should be able to see the center point on the headlight lenses reflected in their beams. Ideally, you want each of these center points to shine right on those little squares of tape you put up earlier. If this is already the case, no adjustment is needed; otherwise, proceed to the next step.
9. Pull the hood release lever in front of the driver's seat, then open the hood all the way and prop it open. You will see two white plastic screws at the back of each headlight assembly. On each assembly, the screw closest to the outside of the car controls the horizontal axis of the bulb. The one closer to the center of the car controls the vertical axis of the bulb.
10. Adjust one headlight at a time by turning the screws with a Phillips screwdriver. Keep your eyes on the beams on the wall as you turn the screws so that you can precisely move the reflection of the center point of each beam right on top of the pieces of tape.