The device's new size allows it to display an extra row of app icons on its home screen.
The firm said it was 18% thinner and 20% lighter than the iPhone 4S. The screen measures 4in (10.2cm) which is still smaller than rival devices from Samsung, Nokia, Motorola and HTC.
It said it would work on Everything Everywhere's (EE) 4G LTE network in the UK.
The news is likely to give the network operator which runs the local Orange and T-Mobile services – an advantage against its rivals which will not launch the higher-speed data service until 2013.
"I think it's obviously what the other networks feared would happen," said Matthew Howett, a telecoms analyst at Ovum.
"The question will be how many non-EE customers make the switch."
Apple said the handset would ship on 21 September.
Faster speeds
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.
However, Mr Schiller said the equipment and associated software meant the iPhone would create better photographs in low light than before.
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. It does not offer wireless charging like Nokia's Lumia 920.
In addition it does not include NFC (near field communication) technology meaning the device will not be able to make touchless payments.
It will be sold with either 16 gigabytes, 32GB or 64GB of storage, with prices ranging from $199 to $399 (£123 to £248) in the US with a two-year 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.
Reworked iTunes
Despite the fact that the iPhone 5 lacks several features found on its rivals, one analyst at the presentation thought it would prove popular.
"There are unprecedented levels of pent-up consumer demand that will ensure it eclipses all previous iPhone launches," said Ben Wood from CCS Insight.
"Newly rebranded UK network EE will be delighted by the fact the iPhone 5 supports the right flavour of 4G LTE technology. This will offer it a unique competitive advantage over other UK networks"
iPhones were not the Apple product to be refreshed.
The firm's iTunes media player and store for Macs and PCs has been redesigned, and there were also new iPods.
Big earner
The latest iPhone's performance will prove critical to Apple's fortunes.
According to the firm's most recent earnings report the iPhone and related services and accessories accounted for 52% of $120bn (£74bn) total net sales over the nine months running up to July – 98 million handsets were sold in that time.
That has helped boost its share price to new heights. At the end of last week the firm was worth $637.85bn based on its share price. That was the highest such valuation to date if you do not adjust Microsoft's 1998 figure for inflation.
However, competition is intensifying. While Apple's margins may be wider, Samsung's handset sales are growing at a faster pace.
According to data from IDC the South Korean firm accounted for 43.6% of the Western European smartphone market between April and June compared to Apple's 19%.
The figures will have been skewed by the fact that Samsung offers more models and the Galaxy S3 was a newer device than the equivalent iPhone, but one industry watcher said the rivalry could intensify over coming months.
"Samsung has been very efficient pushing and promoting their devices offering the biggest commissions to sales people," Francisco Jeronimo, research manager at IDC, told the BBC.
"The momentum they are gaining with consumers is very high and people see it as a very innovative brand – and customers are clearly looking for innovation rather than just refinements. Samsung will also be likely to make further gains by making price cuts before Christmas."
Sent from my BlackBerry wireless device from MTN
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