The car, a modified Lexus GS, uses sophisticated sensors to navigate roads, merge lanes and overtake other vehicles.
The company hopes to make other cars with similar features available within five years, in time for Tokyo’s hosting of the Olympics.
“We aim to be operational by 2020, the year when Tokyo welcomes the Olympic Games,” Yoshida Moritaka, Toyota’s chief safety technology officer, told reporters at the car’s unveiling.
In its current incarnation, the car only switches to fully automated mode once it reaches the less frenetic confines of a highway and passes a sensor.
“The car we have here is able to drive independently from the highway entrance to the exit,” Moritaka said.
But Toyota hopes the technology will help it one day build an entirely driverless car as well as reduce accidents and congestion.
The Japan-based car manufacturer has been a relative latecomer to the rush to design automated cars.
But last month it announced plans to invest $50 million in building artificial intelligence into its vehicles.
The joint research with Stanford University and the Massachusetts Institute of Technology will take place over the next five years, the car manufacturing company said.
Several major carmakers and technology giants have been pursuing autonomous vehicle technology.
Google has been testing self-driving cars in Silicon Valley, while Nissan has vowed to put an automated car on Japan’s highways as soon as 2016.
In 2018, Nissan models should have the ability to avoid hazards and to change lanes, and by 2020 vehicles should be able to autonomously manoeuvre through crowded city roads.
Apple is also rumoured to be pursuing the technology.