Daimler would be fourth automaker with which Toyota has agreed to supply gas-electric hybrid technology. In March, Toyota struck a deal with fellow Japanese automaker Mazda Motor to use Toyota's technology to begin selling a line of hybrid vehicles in the home market by 2013. Toyota also supplies Ford Motor (F) and Nissan Motors (NSANY) with the technology.
In addition to technology, Toyota may also provide Daimler with motors and batteries, the report said. The companies may also consider forming a broad alliance to develop cars that use hydrogen fuel cells.
Toyota declined to confirm the reports, which also appeared in the evening edition of Japan's Yomiuri Shimbun newspaper, but acknowledged interest in expanding its business of supplying hybrid technology to rival automakers.
"As has been our ongoing stance, if we receive requests from outside companies, we will consider the requests, taking into account factors concerning our production capacity and sales," Toyota said in a statement.
In the U.S., Toyota currently sells seven hybrid models, including the popular Prius hatchback.
On Tuesday, the company announced plans to expand its portfolio of hybrid cars, saying it would introduce six new models by the end of 2012. Toyota also plans to offer a cost-competitive plug-in hybrid version of the Prius, and a plug-in model of its RAV4 sports-utility vehicle which is being developed in collaboration with electric carmaker Tesla Motors (TSLA).