The ad, released on YouTube around third-party videos, was set in an animated virtual world in which a male character discussed how he had no feeling until he drove a Toyota GT86.
However, the man got so much feeling that he then drove the car at speed and pursued by a police helicopter through narrow virtual streets, similarly to scenes in Rockstar's popular voice game franchise.
The vehicle then escaped the city and followed signs to "the end of the world", before bursting through a glass barrier onto a real road.
The Advertising Standards Authority (ASA) received two complaints over whether the ad was "irresponsible and condoned dangerous driving".
In response, Toyota attempted to argue that the ad was intended to show "exhilaration" in the GT86 handling rather than "in response to speed or racing".
The company noted that the ad was set in an animated, futuristic world, which it claimed did not reflect normal driving circumstances on public roads. It also stressed that the driver was never shown out of control of the vehicle.
Google, the owners of YouTube, said that the ad did not breach any of its internal policies and asserted that it was the responsibility of advertisers to ensure that their ads obeyed applicable laws.
In its ruling, the ASA said that a number of scenes in the ad showed the character "driving at speed and in a reckless manner", as demonstrated by the shocked reactions from bystanders and the frequent dodging around obstacles.
"Whilst we appreciated that in the world where the ad was set, cars could drive themselves, objects could miraculously appear or disappear and certain everyday objects were contraband, we considered that the roads, public spaces and the car featured in the ad were recognisable as such and were not significantly different from those in the real world," said the ASA.
"We therefore considered that the driving featured, and in particular the speeds shown, could be emulated on real roads. We also considered that the highly stylised nature of the ad glamorised the reckless manner in which the car was driven."
The ASA added: "Because we considered the ad portrayed speed, and the way the car could be handled in a manner that might encourage motorists to drive irresponsibly, we concluded that the ad was irresponsible and condoned dangerous driving."
The ad was banned by the ASA, and Toyota was warned "not to portray speed or driving behaviour in a way that might encourage motorists to drive irresponsibly in future".