We demonstrate theoretically and confirm experimentally the mechanism by which spectral narrowing accompanies enhanced spatial resolution in a saturated coherent anti-Stokes Raman scattering (CARS) signal that is demodulated at the third harmonic (3f) of the pump modulation frequency (f). Under these modulation conditions, theory predicts a narrowing of the full width at half-maximum (FWHM) of the CARS spectrum by a factor of 2.0 with respect to that of the spectrum obtained by demodulation at the fundamental frequency. Theory also predicts an improvement of spatial resolution by a factor of 1.7. Experimentally, narrowing of the FWHM of the CARS spectrum of 1,4-bis((E)-2-methylstyryl) benzene (MSB) crystals by a factor of 2.5 is observed upon saturation. Further experimental confirmation is provided from investigating diamond particles, for which spectral narrowing was enhanced by a factor of 2.8 and spatial resolution was enhanced by a factor of 2. Details of the mechanism and execution of the saturated CARS experiment are elucidated and limits to its applicability are suggested, one of which is the conclusion that the saturation approach is not suitable for extraction of harmonics beyond 3f. In this work, we have developed a more comprehensive understanding of the correlation between the observed experimental results and experimental factors than has been previously reported.