The club were relegated to the third tier of French soccer in 2001 as a result of their financial problems and were forced to pin their hopes on their youngsters.
Success came almost instantly as they needed only two seasons to climb back up to the top flight where they have remained ever since.
"The club bounced back thanks to the academy," first team coach Alain Casanova told Reuters.
The key has been instilling a Barcelona-style system whereby all the teams throughout the club play the same way to make it easier for players to slot into the first team when their time comes.
"We have tried to implement an overall project based on a specific play scheme, as great clubs like Barcelona or Ajax have done," Casanova, who has managed the first team since 2008 and been the driving force behind the academy ideas, said.
"The idea is to have all the teams playing the same way and emphasise the collective work."
The club's financial situation has improved but they still rely heavily on home-grown players.
Eight of the 11 starters fielded in a league game against Lorient in early December came from the academy, including France internationals Moussa Sissoko and Etienne Capoue.
Although Toulouse are not often praised for their style of play, which is based more on physical strength than technical skills and passing, Casanova would like to introduce more of the latter.
"I have tried to implement an overall project from the football school, with the little kids, to the professional squad," he said.
"I want the first team to produce a collective play, based on possession, sharp passing, and the whole plan is based on that.
"When the players you raise have learnt the same play, you save a lot time. They don't need time to adapt to the first team play. And we also bring five to 10 teenagers from the academy each time the pro squad train to get them used to this."
Toulouse's academy, eighth in the French Federation rankings, has 65 players aged from 15 to 18, plus the pre-academy ones and the 120 boys from the football school aged between 7 and 12.
The academy has an annual budget of 2 to 3 million euros ($2.57-$3.86 million) and in the past five seasons three academy graduates have made it to the first team, according to its director, Remy Loret.
"I'm particularly proud of the fact that it has started and it's working," Casanova said.
"Whether I'll be here for a long time or not, I think this plan has put the club on track. It's like Ajax or Barcelona: people will come and go but the philosophy and the method will last." ($1 = 0.7777 euros)
- Sports & Recreation
- Alain Casanova