Topic of this thesis is development of system for automatic watermeter reading. Embedded system is designed on PIC32 platform and it communicates with CMOS VGA chip to retrive a picture of watermeter reading. From that picture it recognise numbers by applying simple OCR algorithm and sends reading thru RS485 communication interface. OCR algorithm takes part of picture where character is located, and divide it to six areas. From this six areas histogram of active pixels is calculated and compared with set of predefined ones. Result of comparsion is set of ten statistical values which are sorted in descending order. The smallest value has the highest statistical certainty and this character is considered as OCR result. To fulfil low power system requirement, code is designed in such manner that all CPU extensive work is done on high working frequency and all other on low frequency.Clock switchin is done by using prescalers, postscalers and PLL. GSM carrier cost savings are achieved by reducing data traffic. Data traffic has smaller amount because system does not sending whole picture to server, it sends just few bytes of OCR characters.