The second-generation Caldina was released in September 1997, enhancing the sporty image through a turbocharged engine option and other features. As with the first-generation models, front-engine, front-wheel-drive and 4-wheel-drive versions were available. The choice of inline 4-cylinder DOHC 16-valve gasoline engines included a 1,800 cc 115 PS lean-burn unit, a 2,000 cc 140 PS "high-mecha" twin-cam unit, a 2,000 cc 190 PS sports twin-cam VVT-i unit (for GT), and a 2,000 cc 260 PS twin-cam turbo unit (for GT-T). A 2,200 cc 94 PS turbo diesel engine was also an option. A 4-speed automatic transmission was employed for all models, except that turbocharged models came with the steermatic buttons for shifting gears on the steering wheel.

The Caldina van did not undergo a model change, and the first-generation model was produced until July 2002. In Europe, the Caldina was marketed as the wagon version of the first-generation Avensis (which succeeded the Carina E).