THE automotive darling of the green movement has grown again in its third generation to emerge slightly larger, roomier, heavier and more refined, yet it also offers significantly better performance and dynamics while setting a new benchmark for environmental friendliness.

For the first time, the Prius is, in effect, a hybrid version of Toyota’s top-selling Corolla small-car with exclusive new interior and exterior designs that continue to stamp it firmly as the world’s most recognisable hybrid.

Although it’s not easy to pick as new from a distance, the first European-designed Prius nevertheless has a smoother new front-end that flaunts Nissan 370Z-style headlights, separated by a token letterbox grille wearing a big blue Toyota badge, which on the premium i-Tech version contains a discreet cruise control radar gun.

A more accentuated wedge shape makes the newest iteration of Toyota’s hybrid icon less cab-forward and ungainly than before, as do wider wheel tracks with 15-inch alloys that continue to wear well-integrated but seemingly unnecessary plastic half-covers.

A 17-inch wheel already available overseas will become an option in Australia next year, which will further reduce a trademark Prius characteristic of appearing to be under-tyred.

Of course, the wider and more square-edged wheelarch-filling tyres will reduce aerodynamic efficiency and, in an indication of just finely tuned for economy the new Prius is, official fuel consumption and CO2 emissions figures increase as a result – from a respective 3.9 litres per 100km to 4.0L/100km and from 89 grams per kilometre to 91g/km.

Out back, a squarer rear-end punctuated by larger, protruding white-lens LED tail-lights and a better integrated hatch spoiler makes it unmistakably a Prius and allows it to cut through the air better than any car bar Mercedes’ big new E-Class Coupe.

Presenting a similarly modernised version of the current design theme inside, the MkIII Prius features key new interior features like a ‘flying buttress’ or bridge-style centre console that houses a well-placed joystick-style gearshifter, below which is a sizeable flat storage tray.

In fact, there’s an abundance of stowage space for one’s customary nick-knacks, including large upper and lower gloveboxes, (front) door pockets and a decent-sized compartment under a neat centre armrest that both lifts open and slides back to reveal a second front cupholder.

A wide upper dashboard display is the focal point of the Prius’ light and airy cabin and comprises a range of initially bamboozling read-outs that can be varied (alas, only by the driver, via the steering wheel) to display unique functions.

They include battery charge, the real-time charge rate, hybrid system power flow and a fuel economy bar graph (now in one-minute increments), as well as traditional trip features like average and instantaneous fuel consumption and average speed, alongside a large digital speedo, clock, fuel gauge and gear position indicator.

There is no tacho, which is in some respects redundant anyway with a continuously variable automatic transmission that offers no manual-shift function, unlike some CVT-equipped cars.

All of this is overlayed by a duplicate image of the steering wheel buttons when they’re pressed, which happened inadvertently to us at least twice, via the laptop scratch pad-style ‘Touch Tracer’ system that includes remote operation of key audio, climate, trip computer and display controls.

This is the first Prius to offer both steering wheel height and reach adjustment, but despite being complemented by effective pump-action height adjusters for both front seats, a relatively shallow footwell and short-travel telescopic steering column range makes finding the perfect wheel-to-pedal ratio difficult.

Interesting features for a small car include a standard head-up display that can be adjusted for height, brightness and, in the i-Tech, sat-nav instructions, while the flagship model’s radar cruise control faithfully follows the vehicle in front at a pre-settable distance but doesn’t work below 40km/h like similar European systems that can also operate in stop-start traffic.

The i-Tech also offers a clever pre-crash safety system that pretensions the front seatbelts under extreme braking, during which both Prius grades activate an emergency LED brake light signal.

Also available as part of a $5000 option pack that also contains sat-nav and a rear-view camera is an upgraded version of Lexus’ self-parking system, which also allows the driver to adjust the size and shape of the targeted parallel parking space.

Safety levels are high, with standard traction and stability control and seven airbags including a driver’s knee airbag, and the latest Prius is expected to be a five-star ENCAP crash performer.

The standard Prius’ soft fabric-trimmed seats are nothing special in terms of side support and many hard plastic interior surfaces abound even in the i-Tech, which gains softer suede-like fabric trims for all of its armrests.

The small sportscar-like steering wheel feels cheap and nasty at base level too, but is a pleasure to hold in the leather-clad i-Tech. There is no actual key – just a compact remote fob that un/locks the car by itself and allows push-button starting/stopping.

That might take some getting used to for the old-fashioned among us, though the outdated foot-operated parking brake is unlikely to win any fans – and where is the handy one-touch indicator function that’s now available on many cars, Toyota?

Interior space is up slightly, especially in terms of rear legroom, which is generous enough to accommodate even the longest legs thanks mainly to the new curved front seatbacks, as well as rear headroom, because the roof’s highest point has moved rearwards.

But the back seat of the Prius is still not a comfortable place to be for passengers taller than 180cm, and the heavily humped centre rear position would simply be a chore to sit on for any extended period.

Rounding out the otherwise spacious and more upmarket new Prius’ interior is a boot that’s larger by 30 litres despite no extra rear overhang, with the added flexibility of a 60/40-split rear seatback that folds fully flat, a luggage cover and a large under-floor storage tub, below which resides a full-size steel spare.

While selected members of the media drove the new Prius around the TMC car-park last month, our first drive on Australian roads reveals its body structure feels more solid overall than before, while Toyota’s latest hybrid hero is significantly crisper-handling, quieter and more refined than before.

Biggest surprise is more direct steering response and even feel compared to its lifeless forebear – the result of the electric power steering rack now being mounted directly to the chassis.

However, its flatter cornering stance comes at the expensive of a jiggly ride on bumpy surfaces, with most roads both in and out of Sydney producing noticeable resonance through the steering wheel, while tyre roar is also pronounced on coarse-chip road surfaces.

More surprisingly, for a bodyshell that’s claimed to be at least as slippery as any other production car available, wind noise is the overriding sound at highway speeds.

On the road, however, the third-generation Prius’ biggest advance is better performance from its larger, Corolla-sourced 1.8-litre four-cylinder.

It’s still not the quietest of engines and even moderate acceleration is accompanied by plenty of revs as the CVT auto makes it do its work. But the 90 per cent new and beefier petrol-electric drivetrain delivers even stronger motor-assisted bottom-end power delivery and overall engine performance is now far more satisfying than the breathless MkII Prius – despite a circa-50kg weight gain, due mainly to extra equipment.

It might be more like a mainstream Corolla than a fuel-sipping dedicated hybrid in every respect on the road, but a significantly more upstream entry-level pricetag of about $40,000 now makes the Prius almost twice as expensive as the cheapest Corolla.

Meantime, the $53,500 sticker price of the premium i-Tech version borrows plenty of technology from Lexus, but costs just $5000 less than that brand’s entry-level IS sedan.

Of course, the Prius party trick is fuel consumption and environmental friendliness, and it’s hard to argue with the latter since this hybrid produces no harmful NOx or particulates whatsoever.

Toyota says fuel consumption of around 4.0L/100km is easily achieved during normal driving, even with the new power button engaged. A novel ‘CO2 Challenge’ conducted at the launch – won by GoAuto with a CO2 output of just 43.8g/km – showed it’s easy to return seriously low consumption and emissions figures in the new Prius.

The Prius’ official average fuel consumption figure of 3.9L/100km is the same as its highway figure, showing that most of its fuel-saving benefits are realised during stop-start urban driving. In the real world, we saw a best figure of 3.7L/100km, before ending up with 4.4L/100km on the final road leg, which included plenty of freeway running.

It’s true that although the diesel Mini Cooper D manual matches the Prius for official fuel economy (but not CO2 emissions at 119g/km), the auto version is both thirstier and dirtier. But we seriously doubt the Prius, when shown undulating roads or away from city traffic, will match the average consumption of emissions figures achievable in small diesels now on the market like the Mini and Fiat’s 1.3-litre diesel 500.

The forthcoming BMW 118d, which officially returns 4.5L/100m, proves you don’t have to sacrifice vehicle size for economy, while Ford’s ECOnetic Ford Fiesta, which is also due on sale here in late 2009 and should set a new economy benchmark of 3.7L/100km, shows conventional turbo-diesel technology can still be highly efficient.

Vastly improved performance, dynamics and refinement will make the Prius appeal to a much a broader audience than before and Toyota rightly expects it to be the most popular Prius yet, as ‘innovators’ and ‘early adopters’ are joined by mainstream buyers – despite the fact next year’s Camry Hybrid will replace it as Toyota’s most affordable hybrid.

Now far more than mere transport, the new Prius is significantly better to drive but is still no driver’s car. Toyota should be commended for setting new hybrid driveability standards in an affordable hybrid, while remaining true to its roots and continuing to offer a bespoke hybrid model for those that want to demonstrate their ‘greenness’.

The first zero-emissions factory-built electric vehicles might be a little more than a couple of years away from reality in Australia, but serious question marks continue to linger over charging infrastructure, battery range and total cost.

In the meantime, Toyota has done enough to ensure the less compromised new Prius continues to officially be both Australia’s cleanest car and the ultimate eco-car, even if in practice an influx of small diesels are nipping at its heels.