The Near Infrared Spectrograph and Photometer (NISP) is one of the two instruments on board the EUCLID mission now under implementation phase; VIS, the Visible Imager is the second instrument working on the same shared optical beam. The NISP focal plane is based on a detector mosaic deploying 16x, 2048x2048 pixels^2 HAWAII-II HgCdTe detectors, now in advanced delivery phase from Teledyne Imaging Scientific (TIS), and will provide NIR imaging in three bands (Y, J, H) plus slit-less spectroscopy in the range 0.9÷2.0 micron. All the NISP observational modes will be supported by different parametrization of the classic multi-accumulation IR detector readout mode covering the specific needs for spectroscopic, photometric and calibration exposures. Due to the large number of deployed detectors and to the limited satellite telemetry available to ground, a consistent part of the data processing, conventionally performed off-line, will be accomplished on board, in parallel with the flow of data acquisitions. This has led to the development of a specific on-board, HW/SW, data processing pipeline, and to the design of computationally performing control electronics, suited to cope with the time constraints of the NISP acquisition sequences during the sky survey. In this paper we present the architecture of the NISP on-board processing system, directly interfaced to the SIDECAR ASICs system managing the detector focal plane, and the implementation of the on-board pipe-line allowing all the basic operations of input frame averaging, final frame interpolation and data-volume compression before ground down-link.