The fifth-generation Hilux that came out in September 1988 represented the three basic concepts of power, sturdiness, and comfort. To enhance its functionality as a multi-purpose vehicle (known as RV or recreational vehicle in Japan at the time), the interior equipment was further upgraded. The basic body variations were reduced to one featuring pressed doors with integrated window sashes. A major difference between rear-wheel-drive (RWD) and 4-wheel-drive (4WD) models was the wheel arch flares: RWD models had fenders without flares, whereas 4WD models came with sturdy-looking overfenders with flares. For this reason, the width of 4WD models became 1,690 mm, or 40 mm wider than that of RWD models. The design of the dashboard and other interior equipment became even more sedan-like than before.

The engine lineup for RWD models included a 1.8-liter gasoline unit (2Y) and a 2.4-liter diesel (2L), while that for 4WD models included a 2-liter gasoline engine (3Y) and a 2.8-liter diesel unit. In answer to diversifying customer needs, the number of RWD models with an automatic transmission was increased, and the luxurious SSR package was made available to a short-bodied 4WD model.

In 1989, overseas production of the Hilux began in Hanover, Germany following a partnership agreement between Toyota and Volkswagen, and the product was marketed in Europe as the Toyota Hilux and the VW Taro. In a minor makeover in August 1991, the front suspension of the double-cab 4WD model was switched to an independent double wishbone suspension with a torsion bar, further improving the vehicle's ride comfort and stability. In August 1994, the engine lineup for RWD models became the same as that for 4WD models (consisting of a 2-liter gasoline engine [3Y] and a 2.8-liter diesel unit), to which a 2.4-liter turbo diesel engine was added in August 1995.