The controversy surrounding the Benetton team continued with the team going unpunished for its tampering with the refuelling system at the German Grand Prix. As part of the deal with the FIA Benetton agreed to make "substantial management changes". Michael Schumacher had received a two-race ban for ignoring black flags at Silverstone. He was replaced by J.J. Lehto. Larrousse was struggling for money and, hoping to get a better result, had hired Yannick Dalmas to drive the second car. Team Lotus was within days of going into receivership and rather than hire a pay-driver it was decided to run Alex Zanardi again and hope for a good result. Lotus regular Johnny Herbert had the first of the new Mugen V10 engines and he was the sensation of qualifying, lining up fourth on the grid behind the dominant Ferraris of Jean Alési and Gerhard Berger and the Williams-Renault of Damon Hill. Then came David Coulthard (Williams-Renault), Olivier Panis (Ligier-Renault), Mika Häkkinen (McLaren-Peugeot), Andrea de Cesaris (Sauber), Eddie Irvine (Jordan-Hart) and Jos Verstappen (Benetton).

On race morning Berger had a huge crash in the warm-up and had to go to hospital for x-rays before returning to start the race. Alési led Berger into the first corner while Herbert was third ahead of Hill, Coulthard and the rest. Irvine made a mistake and punted Herbert from behind and the Lotus spun in front of the pack, causing numerous crashes which resulted in a red flag which stopped the race. Although Herbert started in the spare from the pitlane, it was the end of the road for Lotus. They went into receivership the day afterwards.

Irvine was sent to the back of the grid for his behaviour (and later given a one-race ban suspended for three races). At the second start Alési took the lead from Berger. The Frenchman led in dominant fashion until he pitted on lap 15. When he tried to rejoin the Ferrari refused to engage a gear and a furious Alési departed without a word to the team. Berger led until he pitted and then Hill took the lead until his stop. This was slower than that of his team mate David Coulthard and so the Scotsman was ahead after the stops. Hill quickly caught him and on lap 29 Coulthard moved over to let Hill go into the lead.

On the last lap Coulthard ran out of fuel on the run to the flag from the last corner and so Berger finished second with Häkkinen third, Rubens Barrichello fourth for Jordan and Martin Brundle's McLaren fifth. Coulthard was classified sixth.