Iphone 5's new size allows it to display an extra row of apps icons on its home screen.
The apple officials said it was 18% thinner and 20% lighter than the iPhone 4S.
Apple said the handset would ship on 21 September.
The new screen offers a 16:9 ratio, matching that of widescreen televisions.
Phil Schiller - Apple's vice president of worldwide marketing, who unveiled the device - said existing apps would be shown with black borders until developers updated their products.
The handset also features a new Apple-designed chip, called the A6. Mr Schiller suggested this made it twice as powerful as the earlier model.
The camera is an eight megapixel model - the same as in the iPhone 4S, and a lower specification than LG and Sony's most recent devices.
The handset also uses a new, smaller, socket for its charger. This means owners will need to use an adapter to plug the device into existing speakers and other equipment. The adapter is listed as being £25 on Apple's site.
The handset does not offer wireless charging like Nokia's Lumia 920.
New model will be sold with either 16 gigabytes, 32GB or 64GB of storage. The basic model will be sold for £529 in the UK, but the figure will be lower if bought with a network contract.
In addition to launching the new model, Apple will continue to ship versions of the iPhone 4S and the iPhone 4, but is phasing out 2009's iPhone 3GS.
Apple also announced iTunes, its media player and store for Macs and PCs, was being redesigned and would be released in October, and it also unveiled new iPods
The apple officials said it was 18% thinner hälsporre and 20% lighter than the iPhone 4S.
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