Caldeum concept art.

Caldeum is a second town confirmed to be in Diablo III. It has been known as an enormous trading center only recently occupied by the Kehjistan government following the fall of Kurast.

It remains to be seen how Blizzard is going to capture the "trade capital of the entire world" in-game, as it would be substantially larger than any of the act towns seen in the previous games.

Lore

There is a lore entry about Caldeum on the official Diablo III page. An excerpt from the lore page culminates the recent activity in the area:

"Caldeum was once the proudest city in all of Kehjistan, the trade capital of the entire world. Caldeum was never seen as the heart of the empire, even though it rivaled Viz-jun, and later Kurast, in size, and those who called Caldeum their home liked it that way. -- Let Kurast see itself as the center of the world, they would say. We'll keep our free exchange of goods, currency, and ideas, thank you very much.

-- This veneer began to shred when Emperor Hakan became ill. His influence started to wane, and the mood in Caldeum changed with his health. As he got worse, so did our once fair city.

When he died and his ineffectual child heir took the throne, Caldeum began to circle the abyss. Our list of ills seems never-ending: the state of our downtrodden and the slums they are forced to live in, our incompetent leadership, the reemergence of the intolerant Zakarum, and their quarrels with our mage class...I could go on for pages.

It is all too much for one to bear, really."