A compact VLSI neural processor based on the Optimization Cellular Neural Network (OCNN) has been under development to provide a wide range of support for an intelligent remote sensing microspacecraft which requires both high bandwidth communication and high- performance computing for on-board data analysis, thematic data reduction, synergy of multiple types of sensors, and other advanced smart-sensor functions. The OCNN is developed with emphasis on its capability to find global optimal solutions by using a hardware annealing method. The hardware annealing function is embedded in the network. It is a parallel version of fast mean-field annealing in analog networks, and is highly efficient in finding globally optimal solutions for cellular neural networks. The OCNN is designed to perform programmable functions for fine-grained processing with annealing control to enhance the output quality. The OCNN architecture is a programmable multi-dimensional array of neurons which are locally connected with their local neurons. Major design features of the OCNN neural processor includes massively parallel neural processing, hardware annealing capability, winner-take-all mechanism, digitally programmable synaptic weights, and multisensor parallel interface. A compact current-mode VLSI design feasibility of the OCNN neural processor is demonstrated by a prototype 5 X 5-neuroprocessor array chip in a 2-micrometers CMOS technology. The OCNN operation theory, architecture, design and implementation, prototype chip, and system applications have been investigated in detail and presented in this paper.