The two companies and GAC-Toyota, a venture between the Japanese automaker and Chinese state-owned Guangzhou Automobile Group, will invest more than 1 billion yuan (RM638mil) combined, Pony.ai said in a statement.
"This is not only an important step for Toyota to carry out 'Chinese-style succession and evolution' but also a new stage in our business cooperation with Pony.ai," Toyota China CEO Tatsuro Ueda said in the statement.
Toyota has invested hundreds of millions of dollars in Pony.ai since the companies first teamed up in 2019.
Pony.ai CEO Peng Jun said the move would support the development of the connected car industry.
China has been at the forefront in the development of self-driving cars and Pony.ai has launched robotaxi services in Beijing, Shanghai, Shenzhen and Guangzhou. The company also has offices in the United States.
Automakers outside China have, however, retreated from ambitious rollout schedules predicted a few years ago amid regulatory roadblocks.
Toyota said last month it planned to accelerate the local design and development of "smart cockpits" that meet the needs of the Chinese market, part of a broad pivot to electric vehicles as it seeks to catch up with increasingly aggressive local rivals.
