It would aid training, research and environmental performance, the company said.
While such cash is not unusual, that element of the investment will be seen as significant because of efforts by ministers to reassure the sector on the nature of the divorce deal they are seeking from Brussels.
The Government's communications with Nissan last year helped reassure the fellow Japanese firm enough to announce the building of new models in Sunderland.
Toyota, which also has an engine plant in Deeside, said Burnaston would be progressively upgraded this year with new equipment, technologies and systems and seek to promote supply chain efficiencies to bring down the cost of importing parts from abroad.
They have become more expensive since the EU referendum because of the collapse of the value of the pound.
Sterling's weakness is a double-edged sword though as it has made the cost of UK-made cars more competitive abroad.
Dr Johan van Zyl, the president and Chief executive of Toyota Europe, said: "We are very focused on securing the global competitiveness of our European plants."
He added: "This upgrade...is a sign of confidence in our employees and suppliers and their focus on superior quality and greater efficiency.
"We welcome the UK Government funding contribution for this activity.
"Our investment demonstrates that, as a company, we are doing all we can to raise the competitiveness of our Burnaston plant in Derbyshire.
"Continued tariff-and-barrier free market access between the UK and Europe that is predictable and uncomplicated will be vital for future success."
The Business Secretary Greg Clark said: "Our automotive sector is one of the most productive in the world and Toyota's decision to invest £240 million upgrading its Burnaston plant is a further boost to the UK auto sector."
He added: "Toyota is one of the world's largest car producers and this inward investment underlines the company's faith in its employees and will help ensure the plant is well positioned for future Toyota models to be made in the UK.
"As we prepare to leave the EU, this Government is committed through our Industrial Strategy to ensuring the UK remains one of the best places in the world to do business and we are able to help businesses seize on economic opportunities."
SKY News.
