The Munich-based group said in a statement that sales of its core BMW-brand cars rose by 4.2 per cent to almost 2.1 million last year.
Growth was primarily driven by the strong performance of its X-series SUVs and updated 5-series limousines, the statement said.
While sales in China grew by 15 per cent, European sales edged forward by one per cent and business in the Americas declined by two per cent.
Despite the record performance, BMW was still unable to catch up with Mercedes, which held on to the pole position in the luxury segment with sales of 2.3 million units last year.
Nevertheless, sales chief Ian Robertson insisted that the BMW group as a whole was "the world's leading premium automotive company".
Taking into account sales of BMW's Mini and luxury Rolls- Royce units, the group sold some 2.46 million vehicles worldwide last year.
By comparison, Mercedes-Benz and its Smart brand sold 2.42 million units.
Also today, Volkswagen subsidiary Audi -- another Bavarian contender in the high-end segment -- reported sales up just 0.6 per cent year-on-year in 2017, at almost 1.9 million vehicles.
Audi's sales were near flat in Europe and grew only one per cent in China.
But shipments of cars with the four-rings logo surged 7.8 per cent in the United States, where Audi has in recent years made headlines for its role in VW's 'dieselgate' emissions cheating scandal.
German carmakers have responded to repeated embarrassments over emissions by promising dozens of new electric and hybrid models in the coming years.
The nation's proudest industry must also clean up its act to meet tougher rules on greenhouse gases and harmful pollutants in future.
BMW said it hit a self-imposed target to sell more than 100,000 electric and hybrid vehicles in 2017 across its own- brand and Mini ranges.
Shares in BMW added one per cent to 89.59 euros in trading on the Frankfurt stock exchange this morning.
Volkswagen shares were untroubled by Audi's sluggish performance, gaining 0.75 per cent to 179.14 euros, while the overall DAX index of blue-chip German shares was flat.