The new engine will deliver 100bhp and replaces the larger 1.6-litre 100bhp petrol engine in the Seat Ibiza range.
The SC, five-door and ST models will all be available with the new engine, which will be matched to a choice of five-speed manual or seven-speed DSG transmission.
However, it will only be available in SE and Sport specification models across all three body styles.
The smaller 1.2-litre engine is capable of matching the outgoing unit because of a turbocharger, which also boosts 0-62mph acceleration times by half a second to 9.8 seconds.
On top of this, the engine will also improve fuel economy by 25 per cent from 44.8mpg to 55.4mpg while CO2 emissions are reduced by 20 per cent from 149g/km to a first-year VED-free 119g/km.
The engine features both stop-start technology and brake energy recovery to improve fuel economy when matched with a manual transmission.
When fitted with the manual gearbox, the new 1.2-litre Ibiza will be badged as an Ecomotive model – Seat’s indicator of low CO2 and high fuel economy cars.
Prices start at £12,780 for the Ibiza SC 1.2 TSI SE, leading Seat UK’s Ibiza product manager, Andy McGregor, to say: "The arrival of the excellent new 1.2 TSI in the Ibiza shows that, when it comes to today’s engines, smaller really can be better!”
The Seat Ibiza is one of Seat’s most popular models in the UK. The sporty supermini features typically stylish exterior features and high equipment levels inside.
The Seat Ibiza with a 1.2-litre TSI is available to buy now from Seat dealers, such as Perrys Aylesbury, which boasts a full range of Seat models.