The device would be based on Apple's Siri voice assistant.
Product development began more than two years ago, according to Bloomberg. The device has gone through the research and development phase and is now in prototype testing.
It would be used to control appliances, locks, lights and curtains using voice activation.
Google parent company Alphabet (GOOGL) is also working on a similar device called Google Home.
Apple's device will be different from Amazon Echo and Google Home in that it's expected to have more advanced microphone and speaker technology, Bloomberg added, citing sources.
Shares of Apple closed down on Friday after a note from the European market research firm GfK reportedly said Europe iPhone 7 sales were down 25% during its launch weekend compared to year-ago iPhone 6 sales.
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Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
TheStreet Ratings team rates Apple as a Buy with a ratings score of B+. This is driven by a few notable strengths, which it believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks it covers. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. The team feels its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
You can view the full analysis from the report here: