I am having the exact same problem with my 2006 Prius.

The Battery in the key fob was getting low. I replaced it and everything worked until a week or two after replacing the key fob battery. The car stopped recognizing the fob. The key still works when you place it into the slot. I made sure the smart key function button under the steering wheel was ON. I tried opening the fob up again making sure none of the keys were stuck (The LED indicator lights up whenever you press any of the keys) I used some compressed air to clean the circuit board as well.

I also took my 12V battery to get tested for voltage. The store gave me a printout of the voltage strength and it was fine. I am running out of ideas and can't seem to find a solution posted anywhere. not even in the Prius chat forums. If someone knows the link to the solution of would greatly appreciate it.

 

Did you check the voltage on the replacement button battery?

 

It was a brand new energizer battery for the Fob. It blinks bright red when you press each button. The prius didn't respond to it.

Oddly enough yesterday a friend dropped by in his Lexus SUV. As soon as he arrived my car alarm started going on constantly. Since the Fob stopped working I ran to unlock the door with the valet key and start the car by inserting the Fob to stop the alarm.

Every two minutes the alarm would go off I got frustrated and pressed the alarm key on the Fob to deactivate it and it turned off! I couldn't believe it. The keyless entry was working too.

I did notice that when I pressed any buttons on the Fob sometimes that red light would not come on. So I thought maybe the alarm button was stuck.

I opened up the key fob took the battery out and put it back in. Cleaned the chip with compressed air and everything seemed to work normal for a wonderful 30 minutes until my friend left. This morning it's back square one. Key fob lights up bright red when buttons are pressed but does nothing to the prius.

I'm completely baffled.

I'm going to test the voltage on the new battery nonetheless and I do have some more new ones I could try.

 

I replace the battery on my fob recently and my car started with no problem. You may have a dead battery. I went to AutoZone and replace the battery myself it's in the trunk on the right rear panel underneath the compartment. Have the battery checked in the trunk before you replace it. That was the problem with mine and the issue was resolved. If you happen to take it back to the dealer ask for the manager tell him you want a certified hybrid mechanic ONLY!