A robust signal processor, capable of handling a multitude of signal processing functions over a wide instantaneous signal bandwidth is needed for future military systems where shared sensor and signal processing resources will be employed. We investigated a novel 2D acousto-optic (AO) processor capable of real-time multifunction signal processing. We developed the specifications for an optoelectronic ISAR image formation processor for ship imaging based upon the AN/APS-137(H) Airborne Radar. The baseline processor is designed for high resolution imaging- slant range resolution of 0.3 m and cross range resolution of 1.2 m over 30 m X 30 m window. The optical design of the processor is based on an optically efficient, in-line, high stability, 2D interferometer using four acousto-optic devices invested by Riza. We developed specifications for the processor components, including light source, lenses, photodetector array, and Bragg cells including a multichannel Bragg cell to improve processor bandwidth and reduce its size. We showed that all of these components are commercially available. We breadboarded a narrow bandwidth version of the processor and demonstrated its main operation features. We showed experimentally that the processor has simultaneous spatial carrier generation capability that is controllable with high phase stability and excellent fringe visibility.