Bloomberg reported yesterday that an iPhone with a larger display is in the works. Apple has apparently placed some orders for larger screens with an Asian supplier. They also report that Steve Jobs worked on this newly designed iPhone while on medical leave shortly before his death in October. Apple itself has declined to comment on the report.
Honestly, I wouldn't be surprised if these rumors are spot on. The current iPhone form-factor really blew the smartphone market open when it was released several years ago. Today that market is much more mature and, arguably, competitive and the iPhone is the smallest display available. The success of the iPad has shown Apple what a larger display can do with its iOS so there's some argument that an iPhone with a larger display (or an iPad with a smaller display) is a logical next step for the company.