In 1996 Guerrero and Pagan Racing began competing full-time in the newly formed Indy Racing League with Guerrero driving the No. 21 WavePhore Reynard 94i-Ford Cosworth XB, with additional sponsorship coming from Johnny Lightning (at Disney), Newscast (at Phoenix) and Pennzoil (at Indianapolis). At the season-opening Indy 200 at Walt Disney World at Walt Disney World Speedway Guerrero qualified 2nd and finished 5th. At the Dura Lube 200 at Phoenix International Raceway Guerrero qualified 3rd and finished 16th due to a broken cv joint. At the Indianapolis 500 the team updated to a Reynard 95i and Guerrero qualified 6th and led for a race-high 47 laps and battled for the win with Tony Stewart, Arie Luyendyk, Davy Jones, Alessandro Zampedri and eventual winner Buddy Lazier. On Guerrero's final pit stop on lap 167 he and Lazier came into the pits. While in the pits the nozzle was connected awkwardly and fuel began to spill out. The car then began to catch fire and Guerrero began to climb out of the car when it was determined to be okay to continue racing. Guerrero fell out of contention and went a lap down. On the final lap of the race, as Lazier and Jones crossed the finish line, Guerrero lost control of his car in turn 4 and took out 4th place Zampedri (who was on the lead lap) and 6th place Eliseo Salazar (who was two laps down) and caused Zampedri to get airborne and flip. Guerrero came to a rest inside the pit lane, just past the entrance. Guerrero finished 4th in the championship with 237 points.