Tech websites in China are reporting that the device is being developed in secret, with a little help from Intel, and could communicate with other Apple gadgets via Bluetooth.
According to Chinese site Tech.163, Apple is keen to take advantage of a smart watch that has been developed by Intel, and features a 1.5 inch OLED screen.
The report suggests the 'iWatch' could run a version of iOS, enabling it to easily download apps, and could even be available to buy next year.
Rumours of Apple's interest in a smart watch follow the extraordinary online success seen by the inventors of the Pebble watch, which connects to other smart gadgets via Bluetooth.
The creators of the Pebble claim the device can access GPS on a smartphone to track speed, distance and pace data for runners and cyclists, can act as a remote control for music, and alert the wearer to incoming messages with a vibration.
Would you invest in an iWatch or is it a gadget too far? Leave your comments below...