An apparatus for preparing and dispensing a flavored ice beverage and a method of using thereof. The apparatus includes at least one container for holding flavor ingredients, a blending unit including a blender container and a blending mechanism, an ice flakes supplying unit, a mechanism for transferring the flavor ingredients to the blender container and a computerized control unit for controlling one or more aspects of the process of producing the ice beverage. The flavor ingredients can be in grain form, powder form or in liquid form.