If you're stuck on deciding between these two, then it would be the Lexus. Mercedes' quality has dropped considerably, and they are rated as the most troublesome brand amongst major names by Consumer Reports. It's a shame, really, as they still want to think of themselves as a "premium" brand of car. If you choose the Mercedes, make sure it has one hell of a warranty.
The only consideration, functionally, between the two is the back seat. The IS250's back seat will be smaller, but that's about it.
If you're going by the "bling" factor, then it's Lexus all the way. If this were 10-15 years ago, I might have a different answer.
Other posters have pushed the BMW 3-series on you, and I'd have to agree if you're looking for function over form. And, one of the biggest selling points for BMW is that their dealers back the cars all the way. If you have to go in for service, you get a loaner. When you purchase a BMW, they want you to have a true "premium" buying experience.