Under the agreement signed Thursday, BMW AG will also supply clean diesel engines to Toyota Motor Corp. starting in 2014 in models for the European market.
Executives from both automakers announced at a Tokyo hotel that they are also talking to find other mid-term and long-term collaborative projects.
“We are now joining forces to further develop environmentally-friendly technologies and to expand our innovation leadership in each of our segments,” Norbert Reithofer, chairman of BMW, said in a statement.
The two automakers will also work on improving lithium-ion battery technology, typically used in batteries for electronic gadgets and relatively new to autos.
Under their agreement, BMW is supplying 1.6 liter and 2.0 liter fuel-efficient diesel engines for Toyota. They declined to give details on models.
The announcement was timed with the Tokyo Motor Show, which opens to the public Saturday.
BMW said it is entering its first collaboration with a Japanese automaker because of Toyota’s prowess in hybrids.
Toyota has sold more than 3.4 million hybrids worldwide so far, including models other than the pioneering hit Prius.
Toyota does not have an electric vehicle in its commercial lineup, although it is planning one for next year, for commuting short distances.