The new YouTube app is available to download now from Apple's App Store, Google said in a blog on the company website on Tuesday.
Users will be able to watch "tens of thousands more videos" on the new YouTube App, which has been built by the site's engineers "to give our iPhone and iPod touch users the best mobile experience".
There is a new YouTube channel guide enabling users to swipe through their subscribed channels on YouTube, giving them instant access to new videos.
Improved search tools offer dynamic suggestions as terms are typed, and there are options to share videos on Google+, Facebook, Twitter, text message or email.
Unlike previous YouTube iPhone apps, the new version will feature online advertising. YouTube already runs online ads on its mobile website and app for Android smartphones.
Andrey Doronichev, the head of YouTube mobile, said that the firm is also working on launching a YouTube app for iPad in the "coming months".
He added: "You've already shown us you love YouTube on mobile - to the tune of 1 billion mobile views a day - so we can't wait to see what you think about this new experience."
Last month, Apple announced that the YouTube app would no longer come pre-loaded in the iOS operating system used on the iPhone, iPad and iPod Touch.
The relationship between Apple and Google has become strained ever since Google's Android operating system surpassed Apple iOS to become the most popular smartphone OS in the world.
Earlier in the year, Apple also said that it would dump Google Maps form its mobile device software for the latest release, iOS 6, in favour of its own mapping solution.
Apple is holding a press conference in San Francisco tomorrow (September 12), where many people expect the firm to unveil the latest generation of the iPhone.
YouTube has come as a pre-loaded app on the smartphone since the original iPhone in 2007, and recent Neilsen data showed that it was the third most popular service among iPhone users, across installed and downloaded options.
There is speculation that Apple will announce its own video streaming service on Wednesday, or a separate partnership with another firm for a pre-loaded app on the new iPhone.