In the 2003 Frankfurt Motorshow, Audi launched the second-generation of the A3. The premium version of the A3 is the 3.2 Quattro with a 24-valve 3.2 L VR6 engine. It delivers 250 hp (186 kW) and a peak-torque range with a maximum value of 320 N•m (236 ft•lbf) from 2500–3000 rpm. The new Audi A3 (three doors and SportBack) has been drawn by Italian Walter Maria Dè Silva.

A five-door version was launched in the United States market in May 2005 priced at US$25,450. It uses the 200 hp (149 kW) turbocharged 2.0 L I4 engine with a standard six-speed manual transmission. A DSG clutchless manual transmission is optional and priced at $1,400. The American A3 will initially be limited to front wheel drive, though a Quattro (all wheel drive) version with a 3.2 L VR6 engine will be made available in the future.

The American A3 comes with a great deal of standard equipment, including 17-inch wheels, a 140-watt sound system with 10 speakers and CD player, automatic climate control, and an Electronic Stabilization Program. The $1,800 Sport Package includes colored wheels, a sport suspension, and an upgraded interior with leather sport seats. For $2,025, the Premium Package adds a trip computer, leather seats, and other convenience features. A panoramic sunroof, called "Open Sky System" that comprises a sun-roof and a glass panel over the backseat passengers is optional, as are a navigation system and upgraded Bose audio system.