The company said the Lumia would cost $199 and it will be made available first in India, China and Latin America.
The firm is aiming for markets where smartphones are still relatively new, The New York Times reported Tuesday.
In a sense, the firm is doing a run around markets in which the iPhone has stolen Nokia's thunder.
The company was the world's leader in smartphone sales until Apple burst onto the scene with the iPhone in 2007. Since then, Nokia has also been elbowed aside by a raft of companies using Google's operating system Android.
Nokia is still the second largest producer of cellphones, after Samsung, with global sales of 84 million in the second quarter, compared to Samsung's 93 million.
But Nokia reported a loss of $1.26 billion in the third quarter as sales of its Lumia smartphone line dropped from 4 million in the second quarter to less than 3 million in the third.
Now, the firm has a new target audience in mind, "With the Nokia Lumia 510, we continue to meet our commitment to bring Windows Phone to new, lower price points," said Jo Harlow, Nokia executive vice president of smart devices.
Industry analyst Neil Mawston at Strategy Analytics said Nokia is one hit away from a change in fortunes.
"It will be a double-edged sword for Nokia," he said, referring to the firm cutting its losses when it switched from its own Symbian operating system to Microsoft in 2010.
"But there is definitely potential for Nokia to turn things around. They only need one killer device," he said.