The Corolla FX was a 2-box hatchback version of the fifth-generation Corolla with the trunk room section of the sedan removed. Compact 2-box hatchbacks were selling briskly in the European market, and the trend also influenced Japan, causing domestic automakers to release 2-box hatchbacks one after another. Toyota launched the Starlet, Tercel, Corsa, and Corolla II models in this market, followed by the Corolla FX. The FX offered 3- and 5-door versions, and adopted a distinctive front bumper and grille combination to play up its sporty image. As with the sedan, a choice of 1.5-liter or 1.6-liter engine was available. The 1600 GT was an even sportier version fitted with the same DOHC 16-valve engine (4A-GELU) used in the Levin that produced 130 PS.

The FX subname was derived from the first and last letters of "FF 2-box." Since the Starlet and the Tercel had already been in the European 2-box hatchback market, Toyota chose to replace the Tercel with the Corolla FX, while refraining from using the FX subname in Europe to avoid a conflict with Citroën.