The Smart Machine Vision Sensor (SMVS) is a self-contained low-cost machine vision system that combines an image sensor, a processing unit and communication interfaces in a single unit. This paper describes the design of the SMVS, the concept of the operating system and the application software. The main characteristics of the SMVS are (1) the absence of an analog video signal and (2) the modular design concept. The signal processing is performed with the processing unit and the output consists either of image analysis results or a compressed digital image data stream. The modular design allows for easy customization for applications that require different sensor technologies, resolutions and spectral sensitivities. The modular design is made possible by the development of a generic sensor-CPU interface. This interface can be used with either CCD or CMOS sensors with a resolution of 512512 pixels. It eliminates the need to redesign the processor board with changing sensor requirements. The SMVS is smaller and cheaper than traditional image processing systems based on desktop personal computers. It uses full-frame, non-interlaced sensors with square pixels to provide an optimal image quality, avoiding the drawbacks of an analog, interlaced video signal with ^Lxed frame rate.