Apple unveiled its first budget iPhone as it revealed a new futuristic device which features a fingerprint reader.
Chief executive Tim Cook promised the cheap 5C gadget would come with "all the great technology that customers have loved" on its previous models.
The tech giant announced the departure from its traditional high-end handsets last night, just minutes before it confirmed rumours that the iPhone 5S would be equipped with a scanner to unlock the device and put an end to the days of passwords.
The cheaper version of the iPhone - launched at a time when Apple arguably faces stiffer competition than ever - will be an obvious rival to some of the low-cost gadgets sold by the firm's major competitors.
Mr Cook introduced the device during a presentation at Apple's California base - streamed live at a conference in Berlin - which he used to herald the iPhone 5S as "the most forward-thinking phone we have ever created".
The new flagship mobile - dubbed the "gold standard in smartphones" by the tech giant - will come in more traditional Apple colours of silver and slate grey as well as a new golden hue.
It is billed as a handset that will be "more fun" than any iPhone yet and will come in a range of five vivid colours: blue, white, pink, yellow and green.
It was finally shown to the world after a series of images leaked online claimed to show the 5S while the web was awash with speculation that Apple would also branch out with a budget device.
Mr Cook raised a laugh as he told the audience: "A couple of you may have been expecting this."
He added: "The business has become so large that this year we are going to replace the iPhone 5 and we are going to replace it with not one but two new designs. This allows us to serve even more customers."
Apple's Philip Schiller told the audience: "iPhone 5s is the most forward-thinking smartphone in the world, delivering desktop class architecture in the palm of your hand."
He raised a massive round of applause as he introduced the fingertip scanner - named Touch ID - which, he said, would provide a "simple and secure way to unlock your phone with just a touch of your finger."
The security feature is built into the home button and uses a laser cut sapphire crystal along with a sensor to take a high-resolution image of a user's fingerprint.
According to Apple, the technology can "intelligently analyse" the print to provide accurate readings from any angle.
All fingerprint information is encrypted and the firm has insisted it will never be stored on Apple servers.
Beyond unlocking the phone, the feature can be used as a secure way to approve purchases from the iTunes Store, App Store or iBooks Store, Apple said.
It has promised customers that all actions on the device would be faster than on previous handsets, from launching apps and editing photos to playing graphic-intensive games.
The phone will be available in the UK for a suggested retail price of £549 for the 16GB model, £629 for the 32GB model and £709 for the 64GB model.