The Japanese tech giant hopes the Xperia Z1's 20.7 megapixel camera and 27-millimeter wide angle lens will attract new customers to Sony as well as bridge the gap between digital cameras and mobile phones.
(Slideshow: Smartwatch rivals to Apple and Samsung)
Speaking on Wednesday from the global innovations show, IFA, Sony CEO Kazuo Hirai said the phone "included the very best of Sony's camera expertise" and marked a "watershed moment" for the company.
"I believe that with Xperia Z1 smartphone—the smartphone that we're introducing this afternoon, that we are really bringing some of the great technologies that Sony is famous for—namely our technological advancements in digital imaging, our picture quality in terms of the screens," Hirai said.
Sony has long lagged behind market leaders Samsung, Apple and Nokia in the mobile phone market. Data released last month suggested that Sony Mobile held only 2.2 percent of the global mobile phone market in the second quarter of 2013. Samsung took the top spot—with 24.7 percent of the market—and was followed by Nokia with 14 percent of market share, and Apple with 7.3 percent.
Hirai said the company was impressed by consumer response to the Xperia Z1's predecessor (the Xperia Z). "The features and functions that we've packed into Xperia Z1 is something that's really going to wow customers around the world," he said.
"I think that the important thing for us at Sony is that we are really bringing to the forefront the great technology that we have and really bring that to the consumers. And consumers can decide what suits their best needs, their requirements," Hirai said.
(Read more: Loeb to 'wait and see' after Sony nixes spin-off)
In a statement accompanying the Xperia Z1's launch, Sony said the smartphone, which uses Google's Android operating system, set "a new standard in premium smartphones." It is due to be launched globally later this month, and will also work in accompaniment with Sony's Smartwatch.
"I think that we still have a long ways to go. And we still have yet to see how we will do during the all important holiday season. But I fundamentally believe that with great products like the Xperia Z1 and some of the other products that we are announcing here at IFA, that we are going to have a very strong fiscal year," Hirai said.
The Sony press conference came just hours ahead of Samsung's, where the South Korean company unveiled the Galaxy Gear smartwatch.
Sony shares closed around 1.2 percent higher on the day, after the conference, and 3.5 percent up on the week.