On September 7, 2005 apple announced the successor to the mini, the iPod nano. Based on the same flash memory used in the shuffle the nano is a mere 0.27 inches (6.9 millimeters) thick, weighs 1.5 ounces (42 grams), and is 62% smaller by volume than its predecessor. It has a 65,536 color display that can show photographs. The headphone jack is located on the bottom and it retains the standard 30-pin dock connector for compatibility with third-party accessories. The nano is the first dock connector iPod that cannot sync to any PC (Windows or Mac) via FireWire cable, though it can still be charged via a Firewire connection.

The iPod nano has several features that would later be included into the fifth generation iPod. These features were new to the iPod operating system, including the addition of world clocks, a stopwatch, and a screenlock option. The world clock allows users to set the time in cities around the world, and set alarms for each time zone. The clocks can be set to adjust for Daylight Saving Time. The stopwatch feature allows users to press Start to start the timer, and the Stop button to stop. While the timer is on, the Start button changes to a Lap button that allows the user to time individual laps. The nano saves the user's stopwatch stats for multiple timing sessions, which is useful for comparing times. The screenlock option lets users set a 4 digit passcode for their iPod, and once the screenlock is activated the only buttons that can be pressed are the skip forwards and backwards and the play/pause buttons. The click wheel is used to input the digits to the passcode.

The iPod nano is available in white and black, in both 2 GB and 4 GB configurations. There have been a number of complaints about the Nano's screen being too soft, resulting in it becoming easily scratched or even broken if put under any strain. For this reason they have started packaging both the nano and the 5th Generation iPod with cloth carrying cases which will prevent scratches to the screen and body, both the plastic front and metal back. The nano orginally wasn't shipped with these but, because they listen, after the complaints Apple started bundling them with no price change.