The front-wheel drive 2.0 V6 model was given its world premiere at the Brussels International Motor Show and will hit UK showrooms in March with a £19,995 price tag.
The launch of the new entry-level model marks a major step forward for Jaguar in attracting new drivers, and will undercut key rivals such as the £22,480 BMW 320i SE and the £22,460 Mercedes-Benz C-class C200 Kompressor.
Jaguar managing director Mike Beasley hopes that by pricing the new model below its rivals it will make the X-type more accessible to drivers 'outside the boardroom'.
The 2.0-litre X-type emits 219g/km of carbon dioxide, putting the car in the 25% tax band from April, the same tax paid today by company car drivers covering between 2,500 and 18,000 business miles under the current system, although this will rise to 29% by the 2004/05 tax year.
The new engine produces 157bhp, resulting in acceleration from rest to 60mph in 8.9 seconds and on to a top speed of 130mph.
It produces 146lb-ft of torque at 4,100rpm while returning 30.7mpg. Standard equipment includes air conditioning, front, side and curtain airbags, ABS, electronic traction control and power steering.
But Beasley also confirmed that the manufacturer was looking at introducing a diesel engine to its range for the first time — likely to be the 2.7-litre common rail engine jointly developed by Ford and PSA Peugeot Citroen.
But he stressed: 'We will not install a diesel engine unless we are completely happy with it.'
Also at the show, Jaguar released details of two new engine options. The S-type gains a 2.5-litre V6 while the larger XJ saloon adds a 4.2-litre V8.