The move comes as manufacturers around the world grapple with innovations in the industry.
They said that Toyota will take a 4.9% stake in Suzuki Motor Corp, valued at 96 billion yen (£744 million), and Suzuki will make a 48 billion yen (£372 million) investment in Toyota.
In 2017, Toyota and Suzuki agreed to work together in ecological and safety technology. That deal did not include owning mutual stakes.
Car manufacturers are facing a costly shift towards use of artificial intelligence and various ecological and safety technologies.
Toyota makes the top-selling hybrid vehicle, Prius.