latch system for child car seats

Does the Prius have the latch system for child car seats?Also is the Prius too small to handle 2 car seats and kids comfortably?
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From the manual, p. 132+:
LATCH anchors are provided for the outboard rear seats.

I think you'll find the rear seating area large enough for 2.

It'll do 2 car seats just fine.

We have one of the largest car seats out there (our son was born with medical problems, and needed a special side-facing horizontal seat for a period of time) and we could fit two of them into the back with no problem whatsoever. And still have room left to spare.
We`re planning for a second child and that is one of the reasons we decided on buying a new car this year - our current would be way too tight of a fit with two seats.
The back space is on par with Father-in-law`s Lexus, not cramped at all.

One possible issue to think about is the driver's leg room, but I doubt that will be a problem.

In our Gen 2, we have a fairly large seat (Britax Diplomat, currently rear facing). It's behind the passenger seat, and there's enough room to put the passenger seat all the way back and to recline it slightly (but only slightly).

I suspect that the Gen 3 would have more room than our Gen 2.

If you are over 6 feet, like to drive with the driver's seat reclined somewhat, AND have a large rear-facing convertible seat then you probably should bring the car seat with you to the dealer to make sure it fits.

for what its worth, I believe every car made after 2001 is requied to have LATCH anchors.

As for having enough room, I was able to sit in the back the other day with my 13 and 10 year old daughters, and I am a bigger guy, over 250 lbs, and we all had plenty of room.

I can verify this. I have a baby on the way and I learned a lot in the last few months. Every passenger vehicle sold in the U.S. since 2002 is required to have LATCH. Many trucks have the system as well, though it is not required.