1997 saw sweeping changes in the WRC regulations. New rally car regulations permitted major alterations to vehicles, the point system was changed, and the series was expanded to 14 rounds.
By now, the Impreza was completely developed, and SUBARU worked on a new rally version of it to meet the new regulations. The new model got the season off to an impressive start, winning the first three rounds. Later in the season, it was beset by unexpected mechanical problems such as damage to the timing belt pulley and a torn timing belt, but these problems were quickly resolved. McRae and Makinen fought a close battle for the drivers' title right up until the last round. Ultimately Makinen won it by a narrow one-point margin, but the Impreza WRC won eight of the season's 14 rounds, giving SUBARU an outstanding Manufacturers' Title win. SUBARU had now won the Manufacturers' Title three years running, which was a brilliant achievement and a first for a Japanese manufacturer.