In just its second year of production, the IS 300 returned in 2002 with several additions and improvements.  On the performance front, the IS would now be available with a 5-speed manual transmission (long awaited on the GS sports sedan), and a firmer sports-tuned suspension.  New luxury options also became available, including a navigation system and an all leather interior.  Another Lexus first: in 2002 the IS was also offered as a compact wagon.
The IS 300 was powered by the same 3.0 liter inline six engine, with 215 horsepower and 218 pound-feet of torque.  The engine provided ample power for the compact sedan, pulling it from 0 to 60 in 7.5 seconds.  Large brakes dropped 60 to 0 stopping distance to 115 feet.   This new IS was marked by performance upgrades: the new suspension provided a more responsive feel of the road and the new manual transmission also added to the sporting experience.  The IS was again only offered with rear wheel drive.    
In 2001, a common concern among owners was the vehicle's poor fuel efficiency, observed at 18/23 mpg.  Although it was now increased to 25 mpg on the highway, many still felt that a compact sedan should do better.  While the new IS had created a more dynamic and responsive driving experience than its predecessor, many reviewers suggested that the sedan's styling could achieve more of a balance between sport and luxury, like the GS.