The iconic AWD Outback Wagon provides all the room and traction that many people need from an SUV, without the bulk and poor fuel economy. Increased ground clearance and strengthened suspension improve off-pavement capability. Even so, the Outback is better suited for traversing deep snow drifts or muddy roads, than serious off-road duty. Engine options range from a 173-bhp 2.5L flat-4 (2.5i), a 250-bhp turbo flat-4(2.5 XT), or a 245-bhp flat-6 (3.0 R). Transmissions choices include a 5-speed manual, 4-speed automatic, or 5-speed automatic. The 3.0 R Outback Wagon is available in L.L. Bean Edition and VDC (Vehicle Dynamics Control) Limited models, which are loaded with extras such as a 160-watt CD audio system, GPS navigation, and a Momo® steering wheel.

The Subaru lineup has been simplified. All Legacy based wagons are now Outback models, and all sedans are now Legacys. A new front fascia and grille for 2008. Steering wheel paddle shifters are standard on turbo and flat-6 models equipped with the automatic transmission. A new Legacy 3.0R with a 245-bhp flat-6 is now the top Legacy model. SI-DRIVE adjustable AWD is standard on all 6-cylinder models.