The camera conforms to the Four Thirds System standard, and together with its siblings in the E-4XX series, it is marketed as the smallest DSLR in the world.

[1] As with the E-400 (in Europe only) and E-410 before it, the E-420 is notable for its portability, especially when coupled with the simultaneously released Olympus 25mm f2.8 pancake lens.

In addition to being based on the inherently more compact Four-Thirds system, its diminutive size is achieved by the use of a substantially smaller right hand grip than found on most dSLRs (similar to the grip design used on the E-400 and E-410, but with an added "ridge" for comfort and stability), as well as the continued exclusion of Olympus' well-known sensor-shift image stabilization from the package.

The E-420 uses Olympus' Supersonic Wave Filter to remove dust from the surface of the image sensor.

Advantages over the E-410 include Face Detection Technology for up to 8 faces, Imager AF (contrast-detect autofocus) in Live View mode with certain lenses (which provides 11 autofocus points as opposed to the usual 3), a redesigned grip, Shadow Adjustment Technology for greater perceived dynamic range, and wireless flash control for up to 3 flash units.