Toyota Vice Chairman Takeshi Uchiyamada said working with BMW will allow for a much faster development as they pool their resources.
He said the companies share a corporate culture and they have built trust over the last year. An agreement to work on technologies together was signed in June last year.
BMW, known for its strong design and sporty cars, could be a good match for Toyota, reputed for innovation and solid engineering but sometimes criticized as making dull cars.
Global automakers are forging such partnerships to become more competitive.
French carmaker PSA Peugeot Citroen and General Motors Co. of the U.S. have a deal to share in purchases of parts and services to cut costs. Toyota already has a joint venture with Peugeot Citroen to make small cars in Europe.