This tutorial shows a fairly easy job on how to replace oxygen sensors off of a 1998 BMW 323I. Compared to other E36's this is a rather easy job, because it has a single exhaust pipe. The dual exhaust pipes such as the BMW 328I are similar in replacement, however the o2 sensors are located in hard to reach places.

To complete this job, you'll need a 22 mm wrench, new oxygen sensors, thin flathead screwdriver, and jack and jackstands.

The removal process is quite simple, the oxygen sensors can be seen by just taking a peak underneath the car, they are conveniently located on the side of the exhaust. 

I changed my mind and changed the upstream oxygen sensor as well on this car after I saw how badly off the downstream oxygen sensor was. 

Initially to remove the oxygen sensor from the exhaust you have to put quite a bit of force on the monkey wrench to break the fitting, afterwards you will be able to remove the sensors with your hand.