The car, a 375bhp, 1.6-litre unit with in excess of 314lb ft of torque, also previews a road-going hot hatch, likely to be badged Toyota Yaris Gazoo, inspired by the rallying car.
Microsoft will serves as a technology partner for the team, which is competing as the Toyota Gazoo Racing WRC.
The manufacturer’s president and CEO, Akio Toyoda, drew back the covers on the 2017 challenger at the Paris motor show, and was joined on stage by rally team principal Tommi Makinen, who won four WRC titles driving with Mitsubishi.
The reveal comes after Volkswagen's shock withdrawal from the WRC, as well as the unveiling of the Hyundai i20 WRC car at the beginning of December. Toyota's team is made up of Jari-Matti Latvala and Juho Hänninen, driving two Yaris WRCs, with Finnish driver and reigning WRC-2 champion Esapekka Lappi test driving this season.
"It's been 17 years since we last competed in the WRC, so you could say we are well rested. But now we are back" said Akio Toyoda.
Toyota hopes that by competing in WRC once again, it can learn lessons that will feed back to its road car projects. The collaboration with Microsoft will include the development of a data analysis platform, as well as a cloud-based information-sharing system to allow team members to share content more efficiently.
Toyota and Microsoft will also work together to enhance communication with fans. The two companies have previously collaborated on Toyota Connected, a product development project that collects and analyses large amounts of date to improve products and customer service, and on systems that support the testing of autonomous driving technology.