The MR2's life began in 1976 when Toyota launched a design project with the goal of producing a car which would be enjoyable to drive, yet still provide decent fuel economy. Initially, the purpose of the project was not a sports car. The actual designwork began in 1979 when Akio Yoshida from Toyota's testing department started to evaluate different alternatives for engine placement and drive method. It was finally decided to place the engine transversely in the middle of the car. The result was the first prototype in 1981, dubbed the SA-X. From its base design, the car began evolving into an actual sports car, and further prototypes were tested intensely both in Japan and in California. A significant amount of testing was performed on actual race circuits such as Willow Springs, where former Formula One driver Dan Gurney tested the car.
Toyota made its SV-3 concept car public in the autumn of 1983 at the Tokyo Motor Show, gathering a huge amount of publicity both from the press and the audience. The car, scheduled to be launched in spring 1984 in the Japanese market under the name MR2, which stands for "Midship Runabout 2-seater" and also refers to the vehicle's mid-engine rear-drive configuration, was to become the first mass-produced mid-engined car to come from a Japanese manufacturer.
The small and light MR2 (pronounced "em-are-too"), code named AW11, was something no one had expected from Toyota, known for their economical and practical cars. The two-seat MR2 was definitely not practical as a family car, but the design criteria were different from that of most previous cars. Cars with a similar design and the same concept were the Lancia Beta Montecarlo, Fiat X 1/9 and the exotic Lancia Stratos, all produced in the 70s. The most important features of the AW11 were its light body (as low as 2,200 lb (998kg) in Japan and 2,350 lb (1066kg) in the US), superior handling and lightly powered, small-displacement engine. Toyota's cooperation with Lotus during the prototype phase can be seen in the AW11, and it owes much to Lotus's legendary sports cars of the 1960s and 1970s.