For the third generation, the wheelbase was increased by 5 inches (13 cm) to 96.5 inches (245 cm). A 3-door hatchback, 4-door sedan, 4-door “Shuttle” wagon, and CRX coupe shared common underpinings, but the body panels were completely different for each bodystyle, with nothing interchangeable beyond the front bumper and headlights. The sedan and hatchback shared the same dashboard, but the CRX and wagons both had their own unique dash (CRX having a covered cubby in the middle of the dash, the wagon having a pop up set of vents which could be used or retracted into the dash). A new 12-valve (three valves per cylinder) 76 hp 1500 cc engine was introduced.

The base hatchback and CRX HF used the 1300 cc 8-valve engine giving 60 hp (45 kW). The DX and 1500S model hatchbacks shared the new 1500 cc engine with the sedan, wagon and CRX 1.5. The CRX was a Civic with a slightly different body, being strictly a 2-seater in the US – the rest of the world having a rear seat; this was a lockable storage compartment on US models. The wagon was available in front-wheel drive or part-time four-wheel drive, operated by a push button on the dash. In 1986, the Civic got flush-mounted headlights. The CRX Si was visually altered by body colored bumpers, new alloy wheels and a body colored rubber spoiler-now mounted on the back of the trunk as opposed to the top portion of the trunk. The hatchback received an Si model, with the fuel injected engine, a pop-up glass sunroof, body colored bumpers and sedan-style disk wheel covers. Also in 1986 a four-speed automatic and an Si version of the Civic hatchback were introduced. In 1987, the four-wheel drive system on the wagon was changed; a new real-time four-wheel drive system featured an automatic viscous coupling that shifted power to the rear wheels automatically when needed.