The dramatic end to the 1986 season in Australia, with Alain Prost winning the World Championship at the last gasp created tension between Williams and Honda but the combination was still potent and with Nigel Mansell and Nelson Piquet staying with the team it was still a powerful challenger. McLaren was without John Barnard but retained Alain Prost while Keke Rosberg's retirement had opened the way for Stefan Johansson to join the team, having been dropped by Ferrari in favor of Gerhard Berger. Benetton had hired Thierry Boutsen to replace Berger as Teo Fabi's partner and with the Haas Lola team having closed down the team took over the factory Ford turbo engines. Team Lotus changed color with JPS being replaced by Camel and landed a Honda engine deal for drivers Ayrton Senna and Satoru Nakajima.

Martin Brundle left Tyrrell to join Christian Danner at Zakspeed while Zakspeed's Jonathan Palmer joined Philippe Streiff at Tyrrell, which had gone back to using Cosworth DFZ engines. The only BMW engines left were the factory supply to Brabham, these being the units which the cylinders angled to create a low profile for the BT55. Derek Warwick left Brabham to join F1 returnee Eddie Cheever at Arrows with rebadged upright BMW engines which were now known as Megatrons. The team also got a new technical director Ross Brawn joining from the Haas Lola team.

Riccardo Patrese was joined at Brabham by Andrea de Cesaris while his place alongside Sandro Nannini at Minardi as taken by wealthy newcomer Adrián Campos. Osella had only one Alfa Romeo-engined car in Brazil for Alex Caffi.

Ligier was due to run new Alfa Romeo four-cylinder turbo engines for René Arnoux and Piercarlo Ghinzani but things went badly wrong. Arnoux made disparaging remarks about the Italian company's new four-cylinder turbo engine. Alfa Romeo had only recently been acquired by FIAT which was not keen on the Alfa named being in F1. As a result Alfa Romeo cited a clause in the Ligier contract stating that Ligier should not do anything to damage the image of Alfa Romeo and quit the team. The news was disastrous for Ligier and the team had to miss Brazil while modifying its cars to run Megatron engines.

With the rules restricting turbo engines more and more and fewer turbo engines available several teams went back to Cosworth power and the FIA decided to introduce a separate competition for the normally-aspirated cars, introducing a Jim Clark Trophy for drivers and a Colin Chapman Trophy for teams. Four teams would be eligible: Tyrrell, AGS, March and the new Larrousse Lola team, which did not appear in Brazil. March had backing from Leyton House and Ivan Capelli driving an uprated Formula 3000 car while AGS had hired Pascal Fabre to drive. The overall entry was down to 23 cars and with Pirelli having withdrawn there was only one tyre supplier, Goodyear.

Qualifying in Brazil resulted in a dominant showing from Williams-Honda with Mansell ahead of Piquet. Then came Senna, Fabi, Prost, Boutsen, Berger, Warwick, Alboreto and Johansson.

The March team suffered a setback on race morning when it ran out of engines and so the field was down to 22. At the start Piquet took the lead from the fast-starting Senna while Mansell made a bad start and had to fight his way back to third. on lap seven Piquet suddenly went into the pits, his car having picked up paper in its radiators. he rejoined back in 11th position, leaving Senna to lead Mansell although the British driver was soon in the pits as well to have his radiators cleared. He rejoined behind Piquet and the pair then began to climb through the field. Senna pitted because of handling trouble and so Prost went into the lead and when he stopped for new tyres Boutsen briefly led before Piquet went back into the lead before his second stop. Prost then went ahead again and led for the rest of the afternoon, never looking threatened as he did not have a third tyre stop while his rivals Senna and Prost did. Mansell's race was disrupted by a puncture while Senna went out with engine failure and so Prost came home to win ahead of Piquet, Johansson, Berger, Boutsen and Mansell.