A new lidar instrument was developed to measure tropospheric ozone and water vapor at low altitude. The lidar uses Raman scattering of an UV beam from atm. nitrogen, oxygen, and water vapor to retrieve ozone and water-vapor vertical profiles. By numerical simulation the authors study the sensitivity of the method to both atm. and device perturbations. The aerosol optical effect in the planetary boundary layer, ozone interference in water-vapor retrieval, statistical error, optical cross talk between Raman-shifted channels, and optical cross talk between an elastically backscattered signal in Raman-shifted signals and an after pulse effect are studied. In support of the main conclusions of this model study, time series of ozone and water vapor obtained at the Swiss Federal Institute of Technol. in Lausanne and during a field campaign in Crete are presented. They are compared with point monitor and balloon sounding measurements for daytime and nighttime conditions.