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In November 2002, the fourth generation City was released and included an four-wheel drive version. Like the contemporary Honda Jazz, the City is actually a rebadged Honda Fit, in the City's case a rebadged Fit Aria.

In September 2005, a facelifted version of the City was launched in Thailand and in Malaysia in October 2005; it is known as the City ZX in Thailand, India and the New City in Malaysia. The most significant changes are a new exterior (new front grille, new headlamps, new fog lights, new taillights and bumpers). The front end has been extended forward by 65 mm (2.6 in) while the rear has been extended by 15 mm (0.6 in). The side mirror is electronically foldable. Both the i-DSI and VTEC trim levels have 15 inch alloy wheels as standard equipment. Interior changes are minor but it does include an armrest for the driver and additional map lights.

The engine remains the same but the intake manifold has been modified, resulting a 10% temperature drop in the intake air temperature (IAT), the suspension has been upgraded as well.

Honda City in Thailand, Philippines and Malaysia are using CVT gearbox for both i-DSI and VTEC variants. The CVT gearbox is equipped with a Simulated 7-Speed Automated Manual Transmission (AMT) using paddle shift buttons. This is very rare for a subcompact of its class.