In the past decade the main engine of electronic design automation has been the widespread application of ASICs (Application Specific Integrated Circuits). Present technology supports complete systems on a chip, most often used as so-called embedded systems in an increasing number of applications. Embedded systems pose new design challenges which we believe will be the driving forces of design automation in the years to come. These include the design of electronic systems hardware, embedded software and hardware / software codesign. This paper explores the novel technical challenges in embedded system design and presents experiences and results of the work in this area using the CASTLE system. CASTLE supports the design of complex embedded systems and the design of the required tools. It provides a central design representation, Verilog, VHDL and C/C++ frontends, Hardware generation in VHDL and BLIF, a retargetable compiler backend and several analysis and visualization tools. Two design examples, video compression and a diesel injection control, illustrate the presented concepts.