  We present high-resolution X-ray observations of the small-diameter supernova
remnant (SNR) G349.7+0.2 with the Chandra X-ray Observatory. The overall SNR
spectrum can be described by two spectral components. The soft component is in
ionization equilibrium and has a temperature of ~0.8 keV; the hard spectral
component has a temperature of ~1.4 keV, an ionization timescale of ~5x10^{11}
cm{-3}s and enhanced abundances of Si. The spatially resolved spectral modeling
shows that S may also be enhanced, at least in some regions. The enhanced
abundances clearly point to the presence of an ejecta component in this
remnant. The X-ray morphology of G349.7+0.2 is strikingly similar to that at
radio wavelengths - an irregular shell with a brighter eastern side - which is
consistent with expansion in a medium with a large scale density gradient. The
remnant is known to be interacting with a molecular cloud (from the presence of
OH(1720 MHz) masers), but this interaction is probably limited to the central
portion of the SNR, as seen in SNR IC 443. We found that HI clouds are present
in the SNR region, which supports the notion that G349.7+0.2 belongs to a class
of remnants evolving in the intercloud medium (such are IC 443 and W44,
Chevalier 1999), which is also responsible for the remnant's morphology.
G349.7+0.2 does not have the mixed-morphology found for other maser-emitting
SNRs studied to date in X-rays, but its morphology can be explained by a
projection model for mixed-morphology SNRs. We have identified a point source
close to the center of the SNR with a luminosity of Lx(0.5-10.0 keV) ~
(0.2-2.3)x10^{34} d_{22} erg/s, which is consistent with that of the compact
central objects found in a few other Galactic SNRs.
