Keywords: ultrafast electron diffraction, electron pulse characterization, femtosecond electron pulses, spatial coherence, brightness, structural dynamics, multilayer graphene Abstract Time-resolved diffraction with femtosecond electron pulses has become a promising technique to directly provide insights into photo induced primary dynamics at the atomic level in molecules and solids. Ultrashort pulse duration as well as extensive spatial coherence are desired, however, space charge effects complicate the bunching of multiple electrons in a single pulse. We experimentally investigate the interplay between spatial and temporal aspects of resolution limits in ultrafast electron diffraction (UED) on our highly compact transmission electron diffractometer. To that end, the initial source size and charge density of electron bunches are systematically manipulated and the resulting bunch properties at the sample position are fully characterized in terms of lateral coherence, temporal width and diffracted intensity. We obtain a so far not reported measured overall temporal resolution of 130 fs (full width at half maximum) corresponding to 60 fs (root mean square) and transversal coherence lengths up to 20 nm. Instrumental impacts on the effective signal yield in diffraction and electron pulse brightness are discussed as well. The performance of our compact UED setup at selected electron pulse conditions is finally demonstrated in a time-resolved study of lattice heating in multilayer graphene after optical excitation.