August 1981 saw the introduction of the third-generation Celica. The car was initially available in notchback coupe and liftback forms with many buyers preferring the liftback. The US-made convertible came in 1984. Styling was changed considerably from previous models and power was provided by a 2.4 L 22R or 22R-E engine in all North American models, while smaller engines were used in other countries. The 2.4 L became the biggest 4-cylinder engine offered in any Celica ever. Other engines were the 1.6-liter 4A, 1.6-liter 2T, 1.8-liter 3T, 1.8-liter 4T, 1.8-liter 1S, 2.0-liter 2S, 2.0-liter 18R-G and 2.0-liter 21R, depending on the particular market. Initial trim levels for the Japanese market were SV, ST, ST-EFI, SX, GT, and GT Rally. Rack and pinion steering was offered for this generation Celica.

The Australian, European, Japanese, and general export model Celicas came with rear side vents, while the North American versions received red conspicuity lights on the rear quarter panels.