A hybrid electro-optic image processor has been developed for automatic target recognition and tracking using an acousto-optic correlator and digital electronics. The optical system performs the computationally intensive correlation operation on the large 2-D input scenes. The electronics provide the decision-making capability and also perform part of the postprocessing needed for increasing the peak-to-clutter ratio in cluttered scenes. The system is able to analyze each correlation plane and apply a real-time template selection algorithm to accommodate scale or rotation changes of the target. A demonstration of the current system capabilities is presented using a terrain board with several different types of stationary and moving model vehicles.