The two carmakers have signed a memorandum of understanding (MOU) which will see BMW supply 1.6 and 2.0 litre diesel engines to Toyota from 2014, in exchange for collaborative research on next-generation lithium-ion battery technology.
The diesel engines will go into a number of Toyota's European-market models, allowing the Japanese giant to make up for a lack of modern small diesels - a major obstacle when it comes to Europe's tightening emissions laws.
Along with research into new lithium-ion technologies, the companies have agreed to "identify and discuss" other potential projects.
For its part, BMW is not short on expertise in the hybrid and electric-vehicle field, with its ActiveHybrid range growing and the BMW i models on the way, but this latest collaboration should help to accelerate the company's hybrid programme.
"We are now joining forces to further develop environment-friendly technologies and to expand our innovation leadership in each of our segments," BMW boss Norbert Reithofer said.
"Supplying Toyota with our fuel efficient and dynamic diesel engines represents another important step in the planned expansion of our sales activities for engines and powertrain systems."
Toyota President Akio Toyota offered: "In the spirit of contributing to furthering the development of the auto industry and society, both companies will bring their wide-ranging knowledge - starting with that concerning environmental technologies - to the table and make ever-better cars.”
This latest deal is not the first time the two carmakers have cooperated, with Toyota having provided 1.6 litre diesel engines for BMW's MINI range between 2002 and 2005.
BMW now works with PSA Peugeot-Citroen on small diesel engines - the same company that the German carmaker signed a hybrid collaboration deal with earlier this year.
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