The Toledo was the first SEAT developed entirely under VW leadership. The first generation was a five-door liftback built on the Volkswagen Golf Mk2 Volkswagen Group A2 platform chassis, with boot similar in shape and size to the Volkswagen Bora's but with the advantage of a tailgate. As saloon versions of small family cars were rare in Europe, it was sometimes considered a large family car due to its overall length and boot size, despite having smaller rear leg room, and pricing closer to small family cars.
The Toledo initially featured underpowered engines compared to the Ibiza and Málaga's System Porsche units, such as a base 1.6L 75PS (55kW) petrol engine and a GT version using the 2.0L 115PS (85kW) engine. Later the Toledo would see the addition of more powerful versions, including a 150PS (110kW) 2.0 GTI 16V and 110PS (81kW) 1.9 TDI which, like many diesels built since 1996 by the Volkswagen Group, it is advertised as capable of running on both mineral diesel and biodiesel.