Launched as the first production car in the world powered by a hybrid system, the Prius was equipped with a specially designed VVT-i 1.5-liter gasoline engine and an electric motor. This hybrid system could optimally balance the power of these units to suit the driving conditions. The power split device with a planetary gear set served as a continuously variable transmission, while also efficiently distributing the engine power to the drivetrain and the generator.

The Prius significantly reduced the energy loss through a mechanism to stop the engine when in idle, and the regenerative braking system for converting the kinetic energy into electricity when decelerating and braking. The front-engine, front-wheel-drive sedan could accommodate five passengers, and featured the uniquely proportioned design including a relatively tall body, a large cabin, short overhangs, and a centrally located instrument panel.

The initial ad copy for the Prius touted "Just in time for the 21st century," signifying that it was the forerunner of fossil fuel-free automobiles of the 21st century. While its driving performance was comparable to that of existing gasoline-powered cars, the Prius doubled the fuel efficiency and cut the CO₂ emissions by half. As its export began in 2000, the Prius caught the attention of environment-conscious American consumers, with many celebrities causing a social phenomenon.

The Prius won the 1997 New Car of the Year and the 1997-1998 Car of the Year Japan.