Virtualization was invented more than thirty years ago to allow large expensive mainframes to be easily shared among different application environments. As hardware prices went down, the need for virtualization faded away. More recently, virtualization at all levels (system, storage, and network) became important again as a way to improve system security, reliability and availability, reduce costs, and provide greater flexibility. Virtualization is being used to support server consolidation efforts. In that case, many virtual machines running different application environments share the same hardware resources. This paper shows how autonomic computing techniques can be used to dynamically allocate processing resources to various virtual machines as the workload varies. The goal of the autonomic controller is to optimize a utility function for the virtualized environment. The paper considers dynamic CPU priority allocation and the allocation of CPU shares to the various virtual machines. Results obtained through simulation show that the autonomic controller is capable of achieving its goal.