Starting Tuesday, the lower capacity iPhone 3GS will cost roughly the same amount as Apple's 8GB iPhone 3G. Earlier Monday, a new rumor suggested Apple could be discontinuing the iPhone 3G, which was originally released in 2008.
According to CNNMoney, the new deal from Walmart still requires a two-year contract with carrier AT&T. The U.S. price reduction comes in advance of Memorial Day weekend.
"It is our commitment to always lead on price," said Mehrdad Akbar, senior category director for Walmart.
The move comes less than two weeks before Apple is expected to introduce its next-generation handset, when Chief Executive Steve Jobs delivers the opening keynote for the annual Worldwide Developers Conference on June 7.
The price reduction could be permanent. One analyst said Monday they believe Apple will formally reduce the price of the iPhone 3GS to $99 once the new model is released. Last year, after the iPhone 3GS was released, Apple reduced the price of the 8GB iPhone 3G to $99.
The partnership between Apple and Walmart started in 2005 when the retailer began a pilot program selling Apple's short-lived HP-branded 20GB iPod. Over time, the nation's largest retail chain began carrying Apple's full line of iPods, and in 2008 some of its stores began selling the iPhone 3G. Recently, company officials said they hope to sell the iPad by the end of 2010.