-Real time Handwritten Character Recognition by using Template Matching is a system which is useful to recognize the character or alphabets in the given text by comparing two images of the alphabet. The objectives of this system prototype are to develop a program for the Optical Character Recognition (OCR) system by using the Template Matching algorithm . Handwritten character recognition is a challenging task in the field of research on image processing, artificial intelligence as well as machine vision since the handwriting varies from person to person. Moreover, the handwriting styles, sizes and its orientation make it even more complex to interpret the text. The numerous applications of handwritten text in reading bank cheques, Zip Code recognition and in removing the problem of handling documents manually has made it necessary to acquire digitally formatted data. This paper presents the recognition of handwritten characters using either a scanned document, or direct acquisition of image using Matlab, followed by the implementation of various other Matlab toolboxes like Image Processing and Neural Network Toolbox to process the scanned or acquired image. Experimental Results are given to present the proposed model in order to recognize handwritten characters accurately.