The major characteristics of the third generation Corolla included the discontinuation of the previously established coupe model and the establishment of a hardtop model. The hardtop adopted a somewhat notched "semi-fastback" style, while the sedan incorporated a short deck, "semi-fastback" style with an air outlet louver on the bonnet for accent. In addition, a characteristic design was implemented for the side ventilation as well. Clear differentiation between the sedan and the hardtop was achieved by establishing streamlined side ventilation on the rear quarter panel for the sedan, and likewise, vertical side ventilation on the back end of the rear quarter panel for the hardtop.

Also, the third generation Corolla incorporated new techniques in order to strive for positive diversification through the front mask. Differences were established in not only the radiator grille but also in the bonnet shape, depending on the displacement of the engine mounted in the vehicle. A clearly different personality was advocated for the liftback and coupe models by creating front masks that were entirely different from the sedan and hardtop. For the interior, thorough motion studies were implemented based on ergonomics, and ease of use was pursued. Beginning with the instrument panel covered with a thick padding, an advanced layout was adopted, including the center console with its centralized operation switches.

The third generation Corolla engines needed to clear the major technical issue of emissions. First, the 1.4-liter T-U and the 1.6-liter 2T-U engines were equipped with catalytic converters to meet the regulations. Next, the 1.6-liter 12T engine that incorporated a lean combustion method was added. From there, the lineup expanded to the 12T-U engine that combined an oxidation catalyst with the 12T engine to restore the power that was lost due to these regulations. The 12T-U engine generated a maximum output of 88ps/5600rpm and a maximum torque of 13.3 kg-m/3400rpm.

Production of the 2T-G DOHC engine for the Corolla Levin was temporarily halted when emission countermeasures could not be implemented in time. However, an oxidation catalyst was adopted and the EFI (Electronic Fuel Injection) replaced the Solex carburetors. The engine evolved to become the 2T-GEU engine, generating a maximum output of 110ps/6000rpm and a maximum torque of 14.5kg-m/4800rpm. With this engine, both fuel economy and torque were improved, and the model was masterfully reinstated. Later on with the minor model change, a 3-way catalytic converter, perfected through original Toyota technology, was adopted to enhance power to a maximum output of 115ps/6000rpm and maximum torque of 15.0kg-m/4800rpm. With this, the 2T-GEU high performance engine successfully surpassed the former 2T-G DOHC engine equipped with Solex carburetors.

In addition to these emission countermeasures, advanced technologies were also adopted to meet diverse market needs, such as a 3-speed automatic transmission and variable ratio steering gears.

Enhanced equipment and an interior meticulously finished with high quality were the characteristic features of the third generation Corolla. One piece molded ceiling was adopted on all models to ensure insulation and ample head clearance. Front seats of 2-door models incorporated a foot operated walk-in device for easier access to the rear seats. Wiper and light controls were integrated into the combination switches on the steering column to improve operability. Boosted ventilators and bi-level heaters were adopted to enable switching between fresh and recirculated air for excellent cabin ventilation. And, in addition to all these features, enhanced comfort was guaranteed by implementing thorough noise and vibration countermeasures.

Passive safety features that would become the forerunner to safety countermeasures of recent years were widely adopted on the third generation Corolla. Impact absorption body structure with a crushable zone in the front to back direction was incorporated. Consideration was also given to side impact collisions, and the door thickness was increased. Ultimately, these led to approximately 40 kgs of increase in body weight, but international safety standards were ensured, including US safety standard FMVSS (Federal Motor Vehicle Safety Standard) and various European safety standards. Furthermore, 3-point seatbelts were made standard on all models.