The problem lies within the battery unit for the player. Certain units can be prone to overheating which can then lead to a fire. The issue is not believed to affect any other iPod models or later generations of the nano.
Apple is trying to ease the fears of customers worried that their iPods may be the next to combust. The company said in a statement to the Wall Street Journal that the defect has been traced back to a single supplier and is only present .001 per cent of the first generation nano model.
"Apple has determined that in very rare cases batteries in first generation iPod nanos sold between September 2005 and December 2006 can overheat causing failure and deformation of the iPod nano," the company said.
"There have been no reports of serious injuries or property damage, and no reports of incidents for any other iPod nano model."
This is not the first time Apple has had to deal with exploding batteries. In 2006 the company was among the long list of major vendors that recalled batteries from Sony due to a similar fire risk.