The FIA issued new technical regulations with the express purpose of improving the safety of the rally. They were basically sticking to the organizers' own regulations for the 1997 event, but more restrictive changes were introduced. Taking this new decision into account, MITSUBISHI MOTORS developed the PAJERO/MONTERO EVOLUTION which became the base model for the competition car and was put on sale in 1997. The front and rear track were widened and a double wishbone independent suspension was adopted at the rear. The front suspension has also been renewed by increasing the wheel travel. The body was equipped with over fenders and an aluminum bonnet with an air scoop. A newly designed 3.5L 6G74 type gasoline engine called MIVEC (a valve timing electronic control system with a variable valve timing mechanism) was developed. The maximum power decreased from 300PS to 260PS due to the imposition of a 32 mm restrictor, but the maximum torque was raised from 34 kg-m to 36 kg-m with the incorporation of the MIVEC system. The minimum weight was determined according to the engine displacement and the driving type as a performance adjustment measure to guarantee equal conditions. However, the 2WD Schlesser Buggy was 300 kilograms or so lighter than the PAJERO/MONTERO, the air restrictor size was larger, and the suspension travel was not regulated. In many instances the 2WD cars are handicapped in terms of performance, but on the other hand, the maximum speed in the high-speed flat sections was overwhelming. The MITSUBISHI MOTORS team lineup was composed of Shinozuka, Saby and Fontenay with the T2 specification PAJERO/MONTERO EVOLUTION, while Hiroshi Masuoka was participating in the T2 specification CHALLENGER.

The Dakar Rally, which celebrated its 20th running, reverted back to its original format, and started in Paris for the first time in five years. The participants headed toward its traditional finish in Dakar, with a total distance of 10,593 km, of which the competitive stages totaled 5,219 km.

Bruno Saby posted the fastest time in the first European stage to take the overall lead, but was then unfortunately delayed due to transmission problems. In contrast, Fontenay took over the top position and steadily increased his lead. Shinozuka lost ground due to punctures and getting bogged down in difficult terrain. Despite his problems he managed to gradually close the gap to the leader. An incident occurred in the Taoudenni-Gao stage, in northeastern Mali, where a shot was fired at a competition car. The SS was subsequently canceled and the participants completed the stage at non-competitive speed as a liaison section (road section) to reach Gao for a rest day.

Previously delayed over issues in the early stages, Masuoka climbed back to third. The MITSUBISHI MOTORS team entered the second half of the event with Fontenay first, Saby second, Masuoka third and Shinozuka fourth. Shinozuka then ascended to third after posting a fastest SS time and unexpectedly found himself in second position when Saby got severely bogged down on the final leg. In the meantime, Fontenay continued to post fastest SS times to increase his lead. The T2 specification PAJERO/MONTERO EVOLUTIONs were at the top with the finish in Dakar within sight. When Fontenay, Shinozuka, Saby and Masuoka crossed the finish line in Dakar MITSUBISHI MOTORS took its fifth overall victory, sweeping the first four positions for the second consecutive year. The four MITSUBISHI MOTORS team cars won 15 of the 16 special stages. In addition, PAJERO/MONTEROS swept the first four spots in the non-modified production car class. Luc Alphand of France, a former Alpine skiing champion who was later to join the MITSUBISHI MOTORS team, took on his first challenge in a T1 specification PAJERO/MONTERO (retired) while renowned motorcycle rider Stéphane Peterhansel of France, another future member of the MITSUBISHI MOTORS team, won the motorbike category for the sixth time.