The company wants to produce cars in Australia that can detect kangaroos, potentially avoiding thousands of collisions a year and major insurance costs.
The kangaroo is Australia's largest marsupial and is involved in most animal-car collisions on the continent, according to data from Australian car insurers.
The animal can reach speeds of up to 60 kilometres (37 miles) per hour running on its powerful hind legs.
"In Sweden we have done research involving larger, slower moving animals like elk, reindeer and cows, which are a serious threat on our roads," Volvo Cars safety engineer Martin Magnusson said in a statement.
"Kangaroos are smaller than these animals and their behaviour is more erratic."
Volvo Cars, which is owned by China's Geely, said a team of safety engineers from Sweden were in Australia's capital Canberra this week to film the roadside behaviour of kangaroos and collect data for its detection and collision-avoidance software.
The system detects movements through a radar sensor in a car's grille that scans the road ahead and through a light-sensitive, high-resolution camera on its windscreen.
The car's brakes are automatically applied if the software determines a collision is about to occur.
"Kangaroos are very unpredictable animals and difficult to avoid, but we are confident we can refine our animal detection technology to detect them and avoid collisions on the highway," Magnusson said.
The Australian Capital Territory, where Canberra is located, and areas in the surrounding state of New South Wales are "hot spots" for vehicle collisions involving kangaroos, according to the government.
Australian insurer NRMA said there were more than 9,000 reported collisions with kangaroos in both states in 2014.
The insurer said it could not disclose the cost of the claims but Volvo Cars, citing the National Roads and Motorists' Association -- a different organisation -- said there were 20,000 kangaroo-vehicle incidents across the country each year, leading to claims of more than Aus $75 million ($53 million).