NOKIA has unveiled a new smartphone with a 41-megapixel camera in a bid to catch up with its rivals.

The mobile phone firm said the Lumia 1020 will allow users to zoom in and reframe photos without affecting the image quality.

Nokia's latest high-end smartphone was revealed as the Finnish firm battles to arrest a steady decline in demand for its devices and reclaim ground lost to rivals Apple and Samsung.

The iPhone 5 boasts an 8-megapixel camera, with the next Apple offering expected to feature 12 megapixels.

Speaking at a launch event in New York, Nokia chief executive Stephen Elop said the new handset can capture pictures and video of "amazing quality and amazing clarity".

"Today I'd like to introduce to you all the next chapter in smartphone photography," he said.

"The Nokia Lumia 1020 will change how you shoot and how you create forever."

A UK release date was not confirmed but the Lumia 1020 will be available in the US from July 26, priced at $299.99 (£198).

The Lumia 1020 has image-stabilisation technology, a manual shutter and xenon flash to appeal to photography enthusiasts, Nokia said.

Using a new feature called dual capture, the device can simultaneously take a high resolution 38-megapixel image and creates a five-megapixel picture which is easy to share to social networks.

In addition, the handset's video recording allows users to zoom in up to six times without losing quality.

Analysts hailed the device's camera as "staggering" but claimed Nokia was still struggling to find its true identity in the market.