The Fire will be an effort to take a larger share of a tablet computer market dominated by Apple's iPad. It could help Amazon boost sales of digital goods such as e-books and movies.
The event came a day after Nokia Corp. and Google Inc.'s Motorola Mobility division announced five new smartphones between them.
The two from Nokia will be the company's first to run the next version of Windows.
Consumer electronics makers are trying to generate interest in their products now, before Apple announces a new iPhone and possibly a mini iPad next week.
The Amazon event took place at a former airplane hangar in Santa Monica, Calif., with CEO Jeff Bezos presiding.
Here's a running account of the event. All times are PDT.
Amazon unveiled a slew of other features.
There's "Immersion Reading," in which the book is narrated by a famous actor.
There's also "X-Ray for Movies" on the Kindle Fire HD, where you can tap the screen at any time to find out who the actor is. That uses the IMDb database service owned by Amazon.
"Whispersync for Games," meanwhile, will let you pick up where you left off when playing games.
The Fire will also come with parental controls, adjustable by content. A kid may have free reign on books but have limits on games, TV and movies, for instance. Different time limits can be set for different kids.
There's also a front-facing camera for the first time, and it can be used with a custom app for the video chat service Skype. The iPad has two cameras, which is useful for videoconferencing.
Amazon is coming out with a high-end version of the Kindle Fire. Called Kindle Fire HD, it will have two Wi-Fi channels for faster transfers. That will be crucial for high-definition movies and other large files, Bezos said.
The HD model will also have more storage, starting at 16 gigabytes, compared with 6 GB for the old Fire. It wasn't immediately clear what the updated basic model will come with. The iPad also starts at 16 GB.
Bezos notes that the operating system takes up about 2 gigabytes, leaving an 8 GB model with just 6 GB.
"For a high-def device, 8 GB is dead on arrival," Bezos said.
Amazon is updating its Kindle Fire tablet computer as it steps up competition with Apple's iPad. It will cost $159, down from $199 for the old model. It will start shipping next Friday.
The new Fire will be bigger than the original model at 8.9 inches on the diagonal. That's only slightly smaller than the iPad's 9.7 inches — at a price well below the iPad, which starts at $399 for the 2011 model that's still on sale. The current model starts at $499.
"We decided to go big," Bezos said.
The bigger Fire comes as Apple is believed to be working on a smaller version of its iPad, possibly at 7.85 inches.
Amazon has introduced a new program called Kindle Serials. The idea is you buy a book once and get future installments automatically, without additional fees. Amazon will reissue Charles Dickens' "Oliver Twist" in serial form, for instance.
Amazon's stock hit its highest level ever Thursday, $252.28. The stock was up $3.42, or 1.4 per cent, at $249.64 in afternoon trading during the announcement.
Amazon is dropping the price of its low-end Kindle to $69, from $79. That will start shipping next Friday.
It's also unveiling a new feature that times your reading speed and tells you how much time you need to finish the chapter and the book.
The first of the products Amazon unveiled wasn't the Fire tablet, but a stand-alone e-book reader. It has a black-and-white screen and is called Paperwhite.
It promises 25 per cent more contrast. Bezos said "the whites are whiter, and the blacks are blacker."
The Paperwhite has a light source. Bezos says the device is "perfect in direct sunlight." Tablets such as the iPad and the Fire don't work as well in bright light because they are lit from the back. Bezos says the light on the Paperwhite is directed down at the display.
The device promises eight weeks of battery life, even with the light on.
It costs $119 and starts shipping Oct. 1. Amazon says it will start taking orders Thursday. There's also a model with 3G cellular connections for $179.
Bezos has begun to talk about the Kindle Fire. He called it a service rather than a gadget — a reference to the fact that the tablet is about selling movies, TV shows and other digital content from Amazon's store. Just a few days earlier, Amazon had announced a new content distribution deal with pay-TV channel Epix.
"People don't want gadgets anymore," Bezos said. "They want services. They want services that improve over time. They want services that get better."
The music stops. An Amazon ad appears on screen, and Bezos appears on stage wearing a dark blue suit and a white shirt, with no tie.
"We love to invent," Bezos declared.
The hangar is crammed with about 200 journalists awaiting the announcement. It's draped in black velvet as "Show Me The Light" by the Mystery Jets plays. Amazon's logo is on a huge screen at the front.