Mercedes-benz’s 2010 GLK 350 4MATIC, a distant cousin to the rugged Geländewagen (G-Wagen), is a C-Class–based crossover SUV (with M-Class styling cues) that hauls five people plus luggage, cruises around town, and clambers up a muddy hillside with aplomb.

Built in Bremen, Germany, the 4,036-pound GLK 350 has a 3.5-liter, 268 hp, 24-valve aluminum V-6 with an EPA estimate of just 16 mpg city and 21 mpg highway. Truth be told, BMW’s rival 3-liter X3—with over a half-million already sold—isn’t much better at 16 mpg city and 23 mpg highway. A turbo-diesel GLK, possibly available stateside later this year, should be much more efficient.

Meanwhile, there’s much to like. German pedestrians turned to smile and stare at the newest member of the Mercedes-Benz brigade as we drove it through postcard-perfect villages east of Düsseldorf. With its angular grille, steeply raked windscreen, and sharp side strakes, the GLK sports the brand’s familiar traits, yet it is obviously all-new. Even better, its capable four-wheel independent suspension, with coil springs, gas shocks, and big sway bars with Agility Control, serves up decidedly un–SUV-like road manners.

The GLK has a 7-speed automatic transmission, perfectly weighted steering (with just 2.8 turns lock-to-lock), sharp turn-in, a smooth on-road ride, nippy 6.5-seconds-to-60 acceleration, and a top speed of 143 mph. Grip is assured on any surface thanks to 4MATIC all-wheel drive and traction control with brake and throttle intervention, as well as all-weather tires. There’s almost no body roll. Touch-shift manual control lets you pick the ratio you want from a choice of seven gears. And 258 ft lbs of torque ensures enough low-end oomph to tow a 3,500-pound load.

A well-bolstered driver’s seat, several inches higher than the donor C-Class, offers excellent road command and minimal A-pillar visual interference. The GLK feels sportier, with a willingness to perform road tricks most SUVs would avoid. Massive ventilated discs (13-inch front, 11.6-inch rear) with ABS and Brake Assist make short work of fast stops. On an off-road course in Engelskirchen, despite a locking differential, the GLK proved itself to be a solid-performing SUV that will wade fearlessly through up to a foot of water and traverse tough terrain.

The GLK350 boasts nearly every Mercedes-Benz safety feature, like a steel-reinforced cabin, two-stage front airbags, side airbags (in the front seat backrests), head protection curtains, Neck-Pro head restraints (which move forward in milliseconds to reduce whiplash), seat-belt tensioners, and force limiters.

Figure about $35,900 for a base vehicle. However, with such an array of options, it’s hard to stick to the basics. For starters, there’s an Appearance Package with 20-inch wheels, aluminum roof rails, and all-season tires; a Premium Package with SIRIUS Satellite Radio, power liftgate, rain sensor, and a driver memory seat. Other options are a Multimedia Package with Comand (Mercedes-Benz’s easier-to-use answer to BMW’s iDrive), a navigation system with an easy-to-read 7-inch screen, rear-view camera, Harman/Kardon surround-sound speakers, and a 6 GB hard drive with music register and voice controls. The Universal Media Interface (UMI) works with USB-based iPods, USB memory sticks, MP3 players, and MP3 phones.

Stand-alone options include Parktronic, TeleAid, a trailer hitch, heated front seats, and a rear seat entertainment system. Leather seating and a lighting package—which includes Bi-Xenon headlamps with adaptive lighting, a headlamp washing system, corner illuminating fog lamps, and LED taillights—are just a check away on the order sheet. Tallied up, a fully loaded GLK could run into the low $50,000s.

Smaller than the Mercedes-Benz M-Series, and going head-to-head with BMW’s X3, Audi’s new Q5, the Infiniti EX35, and the Acura MDX, the GLK 350 is a likable package with bold styling and premium equipment. Performance on- or off-road is class-competitive. Fuel mileage aside, the GLK’s impressive dynamics, edgy good looks, and sheer drivability make it a must-try if you’re in the market for a compact luxury SUV.