XMM-Newton observation of the 5.25 millisecond transient pulsar XTE J1807-294 in outburst

We report on the results obtained for the millisecond transient X-ray pulsar XTE J1807-294 in a 40 minute orbital period system, based on an XMM-Newton target-of-opportunity observation carried out during 2003 March. The source was found at a luminosity level of about 2 x 10(36) ergs s(-1) in the 0.5-10 keV range (assuming a distance of 8 kpc). We confirm the presence of the 5.25 ms pulsations (after accounting for the orbital modulation) and find a pulsed fraction of 5.8% in the 0.3-10 keV band. The pulse shape is nearly sinusoidal. The spectral continuum of the source is well fitted by an absorbed Comptonization model plus a soft component. No emission or absorption lines have been detected in the 0.3-10 keV (0.5-10 keV) range with upper limits of 10-40 eV. The reported analysis represents the first detailed study of this source, the fourth belonging to the ultracompact binary system class hosting an accreting neutron star.