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 U.S.-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. 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, which are highly sought after by North American Celica enthusiasts.

In 1982, the New York Yankees began using a Celica as their bullpen car.[27]

Fuel injection became standard on all North American Celicas started from August 1982, therefore the 22R engine became 22R-E (or 22R-EC with California emissions equipment). In August 1982, Toyota added the GT-S model to the North American market to re-inject the sports image that Celica had lost as it grew larger and heavier with each subsequent model. The GT-S included larger 14x7-inch wheels and 225/60HR14 tires, fender flares, independent rear suspension, a sports interior including special seats, and a leather-wrapped steering wheel and shifter knob. Most of these came from the Supra. From the windshield back, both cars were nearly identical when in Liftback form. There were also optional rear louvers for the coupe and Liftback.

The Celica was facelifted in August 1983 for the 1984 model year. The revision included fully retractable headlights, restyled grille, and airdam. The rear combination lamps were also revised. The Japanese Celica 1600 GT got new 4A-GE engine, and the 1600 GT-R also powered by the same motor was introduced. Another new model was the turbocharged 1800 GT-TR.

The GT-S convertible, built by American Sunroof Company (ASC) in California, was originally released in a limited 200 units in 1984. 4,248 more were built for the 1985 model year.

For the European continent, the Celica was offered as 1600 ST with 2T engine and live rear axle (TA60), 2000 XT (21R), and 2000 GT (18R-G). The UK models were 2.0 ST for early version and 2.0 XT for the facelift. All 60-series Celicas intended for the UK market were powered by the 21R engine.

In Australia, Toyota decided initially to use the 21R-C in the Celica. As a result, the car only turned out 67 kW (90 hp). However, for the facelift model, it was replaced by the quicker 73 kW (98 hp) 2S-C motor, now in combination with independent rear suspension rather than the traditional live axle differential. This version, model code SA63, was only sold in 1983 and 1984 and only in Australia. The 2.0 was then replaced by the injected 2.4-liter motor (22R-E, model code RA65) which provided 87 kW (118 PS; 117 hp).