We present deep $BVI$ observations of the dwarf irregular galaxy UKS1927-177 in Sagittarius. Statistically cleaned $V$, $(B-I)$ CMDs clearly display the key evolutionary features in this galaxy. Previously detected C stars are located in the CMDs and shown to be variable, thus confirming the presence of a significant upper-AGB intermediate age population. A group of likely red supergiants is also identified, whose magnitude and color is consistent with a 30 Myr old burst of star formation. The observed colors of both blue and red stars in SagDIG are best explained by introducing a differential reddening scenario in which internal dust extinction affects the star forming regions. Adopting a low reddening for the red giants, $E(B-V) = 0.07 \pm 0.02$, gives [Fe/H]=$-2.1 \pm 0.2$ for the mean stellar metallicity, a value consistent with the [O/H] abundance measured in the HII regions. This revised metallicity, which is in accord with the trend of metallicity against luminosity for dwarf irregular galaxies, is indicative of a ``normal'', although metal-poor, dIrr galaxy. A quantitative description is given of the spatial distribution of stars in different age intervals, in comparison with the distribution of the neutral hydrogen. We find that the youngest stars are located near the major peaks of emission on the HI shell, whereas the red giants and intermediate-age C stars define an extended halo or disk with scale length comparable to the size of the hydrogen cloud. The relationship between the distribution of ISM and star formation is briefly discussed.

10 pages, 7 figures, accepted A&A