Radio Frequency Identification (RFID) systems are widely used in a variety of tracking, security and tagging applications. Their operation in non line-of-sight environments makes them superior over similar devices such as barcode and infrared tags. RFID systems span a wide range of applications: medical history storage, dental prosthesis tracking, oil drilling pipe and concrete stress monitoring, toll ways services, animal tracking applications, etc. Passive RFID tags generate their power from the incoming signal; therefore, they do not require a power source. Accordingly, minimizing the power consumption and the implementation area are usually the main design considerations. This paper presents a complete analysis on designing a passive RFID tag. A system design methodology is introduced including the main issues and tradeoffs between different design parameters. The uplink modulation techniques used (ASK, PSK, FSK, and PWM) are illustrated showing how to choose the appropriate signaling scheme for a specific data rate, a certain distance of operation and a limited power consumption budget. An antenna system (transmitter and receiver) is proposed providing the maximum distance of operation with the transmitted power stated by FCC regulations. The backscatter modulation scheme used in the downlink is shown whether to be ASK-BM or PSK-BM and the differences between them are discussed. The key building blocks such as the charge pump, voltage reference, and the regulator used to generate the DC supply voltage from the incoming RF signal are discussed along with their design tradeoffs. A complete architecture for a passive RFID tag is provided as an example to illustrate the proposed RFID tag design methodology.