The two Japanese firms announced on Friday they will carry out joint R&D on technologies that support "communications between towns, homes, people, and cars" across 4G, 5G and 6G.
They said they aim to develop an operations system for next-generation connected vehicles that integrated devices, networks and services.
KDDI said it had been working with Toyota since 2016 on developing a global platform to "ensure stable high-quality telecommunications around the globe between vehicle communications devices and cloud services."
Toyota, the world's biggest automaker, has been KDDI's number two shareholder since it was formed 20 years ago.
Under the new agreement it will lift its stake from 12.95% to 13.74%. The deal is expected to close in January 2021.
In March Toyota announced a 200 billion yen ($1.9 billion) smart city partnership with Japan's biggest telco NTT.
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- KDDI feels crisis over low 5G adoption
- KDDI, Softbank form network sharing JV
— Robert Clark, contributing editor, special to Light Reading