As a loose successor to the Saga Iswara Sport, Proton gave the Iswara a new facelift and renamed it back to Saga (or know as Saga LMST by local car community) in 2003. The interior has an entirely new dashboard, door panels and an instrument panel with a digital display consisting of an odometer, a fuel gauge and a temperature gauge.
Meanwhile, the exterior received new headlights and taillights and colour-coded bumpers and wing mirrors. Proton retuned the 1.3-litre carburettor engine, and fitted a new exhaust system, increasing its power rating to 83 bhp (62 kW). It is only available with the 5-speed manual transmission.
On 5 March, 2007, Proton launched the 50th Merdeka Anniversary Promotion in Malaysia, where the announced new price of the Proton Saga at that time was RM26,999. The promotion was made as a support to Malaysia's 50th Merdeka Day and also to thank Proton's customers for their support since Proton Saga was first launched, receiving several minor cosmetic changes. The move was also an attempt by Proton to steal potential sales from Perodua's then-forthcoming budget supermini, the Viva. That year, the Proton Saga became the second best selling car behind Perodua MyVi and the best selling saloon car in Malaysia, with over 15,000 orders.
