In this paper the authors present the design and simulation of a 16 bit processor. The design has been implemented using VHDL synthesis tool Xilinx 9.2i. Microprocessor is basically an electronic device that consists of ALU and control circuitry which is required to function as computer's CPU. Microprocessor is integrated circuit that interprets and executes the program instructions and behaves intelligently. The processor operates at a speed of the internal clock and the speed of the clock depends upon the no. of pulses per second.