The Toyota Tercel (Japanese: トヨタ・ターセル, Hepburn: Toyota Tāseru) is a subcompact car manufactured by Toyota from 1978 until 1999 across five generations, in five body configurations sized between the Corolla and the Starlet. Manufactured at the Takaoka plant in Toyota City, Japan, and sharing its platform with the Cynos (aka Paseo) and the Starlet, the Tercel was marketed variously as the Toyota Corolla II (トヨタ・カローラII, Toyota Karōra II)—sold at Toyota Japanese dealerships called Toyota Corolla Stores—and was replaced by the Platz in 1999. It was also known as the Toyota Corsa (トヨタ・コルサ, Toyota Korusa) and sold at Toyopet Store locations. Starting with the second generation, the Tercel dealership network was changed to Vista Store, as its badge engineered sibling, the Corolla II, was exclusive to Corolla Store locations.

The Tercel was the first front-wheel drive vehicle produced by Toyota, although it was the only front-wheel drive Toyota to have a longitudinally mounted engine. For example, the E80 series Corolla's frame (except AE85 and AE86) is similar to the L20 series Tercel's frame. Also, Toyota designed the A series engine for the Tercel, attempting simultaneously to achieve good fuel economy and performance and low emissions. Choice of body styles increased as well, with the addition of a four-door sedan.

The name "Tercel" was derived from the Latin word for "one third", with "tiercel" referring to a male falcon which is one-third smaller than its female counterpart. Similarly, the Tercel was slightly smaller than the Corolla. The early Tercels have a logo on the trunk with a stylized falcon as the T in Tercel. All Tercels were assembled at the Takaoka factory in Toyota City, Aichi or by Hino Motors in Hamura, Tokyo. Hino assembled the third generation Tercel from 1986 to 1990 for the two-door and some three-door models. When Japanese production of the Tercel/Corsa/Corolla II (and the related Cynos/Paseo coupés) came to an end in 1999, 4,968,935 examples had been built.

The Tercel was introduced in Japan in August 1978, Europe in March 1979 (Geneva Motor Show) and the United States in 1980. It was originally sold as either a two- or four-door sedan, or as a three-door hatchback. The hatchback's rear design was the result of using taillights similar in design to those used on the bigger Mark II: the Tercel was originally intended to be sold through Toyopet Stores, alongside the Mark II. The Tercel ended up being marketed through the Corolla Store and the Diesel Store locations in Japan, while a version badged "Toyota Corsa" was marketed in parallel through the separate Toyopet distribution network. In the United States it was named the "Corolla Tercel". Models sold in the US were powered by a 1,452 cc SOHC four-cylinder 1A-C engine producing 60 hp (45 kW) at 4,800 rpm. Transmission choices were either a four- or five-speed manual, or a three-speed automatic available with the 1.5-litre engine from August 1979 on.

In the Japanese market, the 1,500 cc engine developed 80 PS (59 kW) at 5,600 rpm, while the 1.3-litre 2A engine, added in June 1979, offered a claimed 74 PS (54 kW). In Europe, mainly, the 1.3-litre version was available, with 65 PS (48 kW).

In this new front-wheel-drive design, the first for Toyota, the engine is mounted longitudinally. The transmission is mounted under the floorpan, as is the case in a rear-wheel-drive car. Unlike a rear-wheel-drive car, the transmission has a ring and pinion gear on the front part of the transmission, underneath the engine. The engine, transmission and differential are located a little off of the centre line of the car. Halfshafts then extend from the transmission to the front wheels. This made for a taller package than usual, making the beltline higher as well, but Toyota felt that traditionalists might be scared off by a transverse setup. As early as 1980, Toyota also hinted that this setup made the conversion to a four-wheel-drive setup easier, although such a version had to wait for the second generation. The Tercel also had rack and pinion steering, the first time such a design was used by Toyota since the 2000GT.

In August 1980, the Tercel (and Corsa) underwent a facelift, with considerable changes to the front and minor ones to the interior and rear. The 1A engine was replaced by the 3A of identical displacement but now with 83 PS (61 kW). This engine eschewed the TGP lean burn design used on the 1A, instead depending on a catalytic converter to meet the ever more stringent emissions standards of the time.

Toyota redesigned the Tercel in May 1982, now called the Tercel in all markets. Its internal model code is the L20 series. It was available in three- or five-door hatchback models or a four-door station wagon, and also as a four-door sedan in Japan. The station wagon, known in Japan as the Sprinter Carib (Japanese: Toyota Sprinter Carib, short for "caribou"), was introduced in August 1982. The wagon was also available with four-wheel drive (front-wheel-drive wagons were only available in select markets). In Japan, a four-wheel-drive sedan was also available; it, too remained in production alongside the wagon version even after the introduction of the third generation Tercel. Standard front-wheel drive vehicles (and four-wheel drive wagons not equipped with the six-speed manual transmission) came with either a three-speed automatic or a four- or five-speed manual transmission. The four-speed manual was reserved for the very simplest version in North American markets.