The available 2.8-liter turbo-diesel four-cylinder engine is surprisingly satisfying, combining the horsepower of a small gasoline V6 with the torque of a V8 and the mileage of a four-cylinder. The diesel is rated at 160 horsepower and 295 pound-feet of torque. The EPA says the diesel should get 21/26 mpg city/highway. During a week of testing, we averaged about 21 mpg, including a fair amount of time spent off-road in low range. On the highway, the diesel Liberty becomes an easy cruiser, showing just 2000 rpm on the tach at 70 mph. Our highway mileage was close to 24 mpg, some 30 percent better than the 18 mpg we saw with the gas V6. And, just like the V6, the diesel is rated to tow up to 5000 pounds with the optional hitch.

Best of all, the new diesel seems to suffer few of the tradeoffs associated with oil-burning engines of the past. There is practically no smoke, and very little noise or vibration. This is largely thanks to the new common-rail technology developed in Europe, which uses a high-pressure fuel injection system that burns diesel fuel much more cleanly than earlier designs. There is no warm-up period before starting, because the glowplugs are electronicaly controlled. The turbocharger is an advanced design with variable-geometry vanes that deliver significant induction improvements at both low rpm and high rpm, and at high altitudes.

The diesel comes standard with a stronger five-speed electronic automatic transmission, which benefits from advanced logic. Depending on throttle input,this transmission can deliver two separate second-gear ratios, a lower ratio for quicker acceleration, a taller one for smooth downshifts.

The Liberty doesn't ride as smoothly on the road as a Ford Escape, particularly over bumps and other irregularities where it bobbles a bit. Nor does it handle as well as the more car-like SUVs. Steering effort is relatively easy at low speeds for a 4x4, nice when parking. On the road, the steering is reasonably solid on-center, a benefit of its power-assisted rack-and-pinion design. But the long-travel off-road suspension, set up to absorb impact without being overly harsh, makes for lethargic transient response in lane-change maneuvers. That said, the Liberty rides reasonably well for a short-wheelbase 4x4. It doesn't beat the driver up as much as a Jeep Wrangler does. The wider tires that are standard on Limited and optional on Renegade seem to offer more stability than the narrower tires of the Sport. The Liberty handled winding Virginia backroads well and felt fine on crowded freeways around Los Angeles.

The electronic stability program that comes on Liberty models can help the driver avoid accidents. ESP is especially valuable when driving on mixed surface conditions such as patchy snow, ice or gravel. If there's a discernible difference between what the driver asks through the steering and the vehicle's path, ESP applies selective braking and throttle input to put the Jeep back onto the driver's intended path. The system is calibrated to offer more control of the vehicle under a variety of conditions, and to operate in a manner that is not intrusive in normal or spirited driving.

We've also found the Liberty capable of handling fairly gnarly trails. It tackled steep ditches and gullies on an off-road trail, thanks to its short front and rear overhangs and a suspension that articulates well. We appreciated its tight turning radius while weaving through a stand of tightly spaced trees. We clambered over big rocks and fallen trees and slowly forded boulder-strewn creeks with 18 inches of rushing water. Jeep says Liberty can handle 20 inches at 10 mph. Its traction up steep, muddy banks was impressive, with no wheelspin.

Keep in mind, however, that the Liberty is limited by just 9.4 inches of running ground clearance, only an inch more than a Subaru Outback. Rocks will contact the skid plates, a sound we sometimes experienced although we suspect no harm was being done. Another fact serious trailblazers should note is that the Liberty platform is less upgradeable than Jeep's other 4x4s, such as the Wrangler and Grand Cherokee. However, a locking rear differential is available as a factory option ($285) for the Liberty, and in truly slippery situations, it makes a big difference. If you need a small SUV with the guts to occasionally negotiate irregular terrain or slog down muddy trails, the Jeep Liberty is a good choice.

Four-wheel-drive models come standard with Jeep's tried-and-true Command Trac part-time system. It works great. Shift from 2WD to 4WD on the fly with a slight pull on the hand lever. When the trail is looking really ugly, slow to 2 or 3 mph and while still coasting, shift into neutral, and pull the lever up higher for low range. But be aware this is a traditional part-time 4WD system, and it's not meant for use on dry pavement, where it causes the wheels to bind up when accelerating out of a tight corner. You'll want to shift back to 2WD when you're on solid road.

Selec Trac is an optional system that offers all the modes above but adds full-time 4WD capability. The full-time mode is ideally suited to inconsistent conditions: patches of ice, gravel roads, and slippery pavement. It also works on dry pavement, because a planetary center differential allows the front and rear axles to turn at different speeds.

Like most small SUVs, Liberty follows the trend away from body-on-frame to unibody construction. Jeep calls Liberty's construction uni-frame because it's a beefed up unibody with frame-like reinforcement rails. This gives the Liberty increased strength and rigidity. That rigidity allowed the chassis engineers to finely tune the suspension without having to compensate for a Flexible Flyer-type chassis. The Liberty suspension uses coil springs at all four wheels. Breaking from Jeep tradition, the front suspension is independent, like in the new Grand Cherokee, with forged steel control arms.

For a better off-road ride, Liberty offers eight inches of suspension travel. Short front and rear overhangs (the distance from the tires to the ends of the vehicle) allow steep angles of approach (36 degrees) and departure (32 degrees) in the rough stuff, so you won't be dragging the front bumper in gullies or even in New York City parking garages. The Liberty approaches the capability of the Grand Cherokee and it will go many of the places that a Wrangler, the king of off-road vehicles, can go. The difference is that the Liberty is more of an occasional off-road prowler, while the Wrangler is built to last in that environment. Still, the Liberty is more at home in the rough stuff than the Escape, RAV4, or most of the bigger SUVs such as the Ford Explorer, which are quickly left behind in really challenging terrain, spinning their wheels and banging up their rocker panels.

At the same time, Liberty's suspension allows reasonable on-road comfort. Progressive-rate springs deliver a nice balance of off-road grip and on-road ride, though humps in the road can still be jolting. The Liberty feels a bit jouncier on rough pavement; taller, squishier, more off-road oriented than the Escape. With the long-travel suspension, cornering takes on a lower design priority. On rugged terrain, however, the Jeep offers a much more comfortable ride than the Escape because the Ford's limited suspension travel and lightweight components are out of their element in the rough. The Liberty feels more substantial than the car-based SUVs and it is.

All Liberty models come standard with four-wheel disc brakes and ABS. We found the Liberty's brakes easy to modulate in heavy stop-and-go traffic. Liberty's ABS is specifically calibrated to handle off-road situations: In low range, the anti-lock brake system allows some wheel lock, such as when descending steep gravel hills. On the road, its ABS reduces skidding for improved control steering control, but allows some lockup for shorter stopping distances.