Proton Saga LMST made in 2003. As a loose successor to the Saga Iswara Sport, Proton gave the Iswara a new facelift and renamed it back to Saga in 2003. Proton retuned the 1.3-litre carburettor engine, and fitted a new exhaust system and extractors, increasing its power rating to 83 bhp (62 kW). It was only available with the 5-speed manual transmission. This generation is known as Saga LMST. The interior had 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.
On March 5, 2007, Proton launched the 50th Merdeka Anniversary Promotion in Malaysia, where they announced new price for the Proton Saga which were sold at RM26,999. Advertising campaigns for the Saga Aeroback used a notable rendition of Justin Timberlake's hit single SexyBack, with the lyrics changed to "AeroBack". 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. This version is quite notably the fastest and the lightest version of the Saga series Proton has ever produced. However, many public complaints have been filed to this version including interior quality problems such as broken power window switches and uncontrollable flow of the air-conditioning system due to Proton's carelessness in skipping strict quality test to ship the car quickly from overwhelming demand during promotion time.