Embraced by Hollywood stars and beloved by environmentalists, the Prius has been the envy of Toyota's rivals since making its debut in 1997 as the world's first mass-produced hybrid.

The crisis-hit Japanese auto giant is a pioneer in fuel-sipping hybrids, which run on a combination of petrol and electricity and are vital to the company's efforts to stay in pole position in fuel-efficient automobiles.

Toyota, whose edge in green technology helped propel it past General Motors in 2008 to become the world's biggest automaker, has struggled to keep up with demand for the Prius in recent years.

But a software glitch with the braking system of its newest model now threatens to tarnish the image of petrol-electric cars, just as Toyota reels from massive worldwide recalls due to separate accelerator pedal trouble.

Toyota said Tuesday it would recall 437,000 hybrids around the world, including the newest version of the Prius.

Favoured by celebrities including Leonardo DiCaprio, Brad Pitt, Cameron Diaz, Susan Sarandon and Britain's Prince Charles, nearly 1.5 million Prius vehicles had been sold in 40 countries as of August 31.

The Prius problem "is certainly giving hybrids a bad name, especially in the United States", said Koji Endo, an auto analyst at Advanced Research Japan.

"People who have never driven a Toyota hybrid and were considering buying one may stop and think, 'Wait a second'," he said.

The Prius, which boasts world-beating fuel consumption of 38.0 kilometres per litre, or 50 miles per gallon, has been the most popular hybrid globally since the first model's launch.

Buyers have had to contend with long waiting lists at US dealerships, which have been able to charge full price on the Prius while forced to offer steep discounts on gas-guzzling vehicles.

Yet while Toyota leads the industry in terms of brand loyalty, the brake flaw could deter buyers at a time when interest in less-polluting automobiles is growing because of worries about global warming, Endo said.

Toyota, which acknowledges facing "a moment of crisis", has said it redesigned the anti-lock braking system (ABS) for the Prius in January. It will offer a software fix for its dealers to install in the recalled vehicles.

It says the delay occurs when the vehicle switches to the conventional hydraulic brake from regenerative braking, used by hybrids to capture the energy of the car's motion to recharge the battery for its electric motor.

Drivers "can experience reduced braking performance resulting in increased braking distance", the automaker said in a statement.

Some Prius drivers, including Apple co-founder Steve Wozniak, have also complained their cars sped up while in cruise control.

But Toyota says it has never found an incident of unintended acceleration caused by a software fault.

Even so the problems are a heavy blow to Toyota, which has bet heavily on hybrids, in contrast to some competitors, such as Nissan, that see them as merely a passing fad on the road to pure electric vehicles.

Toyota produced 530,000 hybrids in 2009, spanning 15 models from sport utility vehicles to sedans, mini-vans and the luxury Lexus series.

It aims to boost annual output of the petrol-electric automobiles to about one million vehicles within the next few years.

But its lead in hybrids may now be under threat, as rivals seize on the opportunity to wrest back market share lost to Toyota during a global expansion drive that once seemed unstoppable.