The much-anticipated new version of the iPad was spotted at the launch of Rupert Murdoch's digital newspaper The Daily, according to Reuters news agency.
Eyewitness saw what appeared to be a working model of the iPad 2 with a front-facing camera at the top edge of the glass screen, said Reuters.
Speculation is rife that the iPad 2 is due to be released by the Spring. According to rumours, the device will include a front and back-facing camera, USB ports, SD card slots, HDMI out, 1080P playback and full GPS.
Apple sold 14.8 million iPads last year. Total tablet sales reached 19.5 million for the whole of last year, said Gartner, with iPads being increasingly adopted by corporate users.