A logo of Toyota Motor Corp is seen at the company's showroom in Tokyo, Japan June 14, 2016.
The Japanese giant's investment values Grab, South-east Asia's largest car-hailing service, at just over US$10 billion, Bloomberg reported.
Toyota was initially cautious about ride-sharing and autonomous-driving technology.
On April 8, Uber's rideshare service disappeared and commuters in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam switched over to the Grab app.
Japan's SoftBank Group Corp last month announced it would invest $2.25 billion in the Cruise autonomous vehicle unit of General Motors Co, while Fiat Chrysler Automobiles NV and Jaguar Land Rover Automotive PLC have agreed to supply vehicles for Alphabet Inc's self-driving auto subsidiary Waymo. In 2016, General Motors invested US$500 million in Lyft, and Volkswagen also poured US$300 million into Israeli taxi app Gett in the same year.
South Korea's Hyundai Motor Co and Japan's Honda Motor Co Ltd have also previously funded Grab, which said it has achieved run-rate revenue of over $1 billion.
A man walks past a Grab office in Singapore March 26, 2018. The company's app has been downloaded onto over 100 million mobile devices and the firm logs over 6 million rides per day.
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The $1 billion investment is part of a broader fundraising round by Grab, which said it will use the money to further expand its food delivery service and mobile payment platform across the region.
The investment comes as Toyota works to adapt to what company president Akio Toyoda calls "profound change" in the industry. "We want to be the one-stop mobility platform for users".
A Toyota executive will be appointed to Grab's board and another Toyota representative is being tapped to be an executive officer at Grab, the company said.
Grab will work with Toyota on how connected vehicle services on the Toyota Mobility Service Platform - such as user-based insurance, financing programme and predictive maintenance - can enrich the Grab experience for drivers on the Grab platform.
Toyota said on Wednesday that it reached a deal with Grab Holdings to strengthen a partnership they already have in order to grow in mobility services in the region. Six-year-old Grab faces fierce competition from Indonesian rival Go-Jek, which is expanding ride-hailing and other services in Southeast Asia.
Last month, Indonesian ride-hailing and online payment firm Go-Jek said it would enter Vietnam, Thailand, Singapore and the Philippines in the next few months, investing $500 million in its global push. Uber acquired 27.5 percent of Grab in exchange for the USA firm's Southeast Asian business earlier this year.