The Kirobo Mini may even have a role as a baby substitute in Japan, where falling birth rates have left many women childless.
The doe-eyed robot is just four inches tall, speaks in a high-pitched baby voice, and will go on sale in Japan for £300.
Fuminori Kataoka, general manager in charge of the project, says its value is emotional, and it could be a faithful companion for the home or the car.
"Toyota has been making cars that have a lot of valuable uses," he said. "But this time we're just pushing emotional value."
The Kirobo Mini is equipped with a camera, microphone and Bluetooth, and connects to a smartphone, which needs to be installed with a special software application.
Voice recognition means it will turn its head when it is spoken to.
The robot will be launched in Tokyo and near the company headquarters, before a planned nationwide rollout next year.
There are currently no plans to sell it outside Japan.
Mr Kataoka said more people in Japan were now living alone, including the elderly and young singles, and they need someone or something to communicate with.
"This is about the existence of something you can talk to" he said. "He wobbles a bit, and this is meant to emulate a seated baby, which hasn't fully developed the skills to balance itself.
"This vulnerability is meant to invoke an emotional connection. A stuffed animal might not answer back, but people do talk to it, like my daughter once did. But if it talked back, wouldn't that be better? And isn't this better than talking to a box?"
Companion robots are being developed in the United States too, with robotics experts at the Massachusetts Institute of Technology about to launch Jibo, a robot which resembles a swivelling lamp.
Artificial intelligence is increasingly part of the car production industry, with the growth of self-parking and ultimately self-driving vehicles.
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