The Japanese electronics maker said on Thursday that its 20-gigabyte device - to be launched on 10 July - will be able to store 13,000 songs.
Dubbed the Network Walkman NW-HD1, it marks a major upgrade to the legendary Walkman brand and comes on the 25th anniversary of the introduction of Sony's groundbreaking portable music player - 1 July 1979.
Sony said the NW-HD1 will be the smallest 20-gigabyte player on the market. It is slightly larger than a credit card and 12.6mm thick.
The battery lasts 30 hours, at least three times longer than the iPod's - a selling point that Sony plans to play up in promoting the device.
But drawbacks of Sony's technology lie in the detail.
"This very clearly completes the range
Sony network services Europe
As with Sony's other players, the NW-HD1 plays songs in the company's proprietary ATRAC format only, meaning it is not compatible with other online stores and cannot play tunes in the popular MP3 format.
It is expected to sell for around $487 in Japan and less than $400 in the US, Sony said, undercutting Apple's 40-gigabyte device, which sells for $499 and can hold up to 10,000 songs.
Sony said it packed more songs in a smaller storage space by using advanced compression technology.
Because Sony uses the same 20-gigabyte hard drives across many of its products, including computers, it stands to benefit from massive discounts for buying these devices in volume.
"Prices could fall by as much as 50% in the next 12 to 18 months," said Richard Dougherty, lead analyst with Envisioneering Group of Searford, New York.
Apple CEO Steve Jobs has seen
huge success with iPod sales
Sony declined to comment on sales targets. It has sold 340 million units of the Walkman over the past 25 years, including CD- and MD-based models.
Since Apple launched iPod three years ago it has dominated the digital music player market, outselling all competitors by nearly a two-to-one margin. Apple has an even larger lead in downloads, selling in excess of 85 million digital tracks.
Sony's device will initially launch in Japan this month, then the US by mid-August, followed by Europe in September.
The portable music player is seen as a crucial addition to its range of products in boosting usage of its online music store Sony Connect. Officials are hoping the cachet of the Walkman name will help it close the gap on the iPod and Apple's iTunes download service.
"This very clearly completes the range for us," said Robert Ashcroft, senior vice-president of Sony network services Europe, a division of Sony Electronics.
Ashcroft said Sony Connect was due to be launched in Europe next week, beginning with the French market.
Assembling a large installed base of consumers with digital music players is considered vital in order to survive in the brutally competitive digital download market.