On October 12, 2005, Apple announced at the "One more thing..." event, the fifth-generation iPod, which featured the ability to play MPEG-4 and H.264 video with resolutions of up to 480 x 480 and 320 x 240 respectively (videos purchased from the iTunes Music Store are limited to 320 x 240.) Some users have reported the ability to play widescreen resolutions up to 640x360 using MPEG-4 and 400x192 using H.264. The new models are available in 30 and 60 GB capacities and are priced the same as the previous generation at $299 and $399 USD, respectively. However, the 30 and 60 GB versions differ in body thickness with the 30 GB version being slightly thinner.

It can also display video on an external TV using the iPod AV or S-video cables with the iPod Universal Dock, however video watched on a TV is often of poor quality due to the fact that iPod video can only play videos up to 480 x 480. The screen size is now 2.5" diagonally, 0.5" larger than the previous iPod. It is also 30% thinner than the previous full-size iPod. The reported battery life for the 30 GB is 14 hours and for the 60 GB is around 20 hours. Watching movies reduces that amount to 2 and 3 hours respectively.

The click wheel design is the same as the previous generation, but is marginally smaller than before. The new click wheel is completely flat, unlike older models where the center button is slightly rounded. Apple has stopped using the click wheels used in the fourth generation iPod and iPod mini from their previous supplier, Synaptics Inc of San Jose, CA, and now uses an in-house solution. The earphones design is the same as the previous generation, but the plug is marginally smaller than before. The new earphones' plastic near the cord is flat, unlike older models where the plastic near the cord is slanted.

The headphone jack has been moved from the center of the top to the right of the top, while the hold switch has been moved to the left side of the top. Gone from the fifth-generation iPod is the remote control accessory port, previously found beside the headphone port, meaning that accessories such as the Griffin iTrip will no longer work. Griffin has, however, released a new version of the iTrip for the new iPod, which mounts to the dock connector on the bottom of the unit. The fifth-generation iPod no longer supports file transfers via FireWire, but still supports charging using FireWire.

Like the iPod nano, it comes in two colors, white and black, and it features the World Clock, Stopwatch, and Screen Lock applications. The fifth-generation iPod also comes with a thin slip case, most likely in response to many complaints concerning the iPod nano's easily scratchable surface. Apple has also discontinued the inclusion of an AC adapter. One must purchase one separately in order to charge it from the AC.

Other notable improvements include the reduction of minor audio defects, such as hard drive noise being heard through the headphone jack, as well as an increase in recording quality to 44.1 kHz stereo, 22.05 kHz mono. A third-party addon will still be required in order to record audio on the iPod, as it was in previous generations.