In this work, a fully implantable and scalable neuroprocessor has been designed to process neural recordings in awake behaving animals. The neuroprocessor operates at 6.4 MHz to process neural signals from 32 microelectrode channels sampled at 25 KHz and transmits only the critical neural information over a 1 Mbps wireless channel in order to meet the stringent hardware and communication constraints imposed on an implantable device. The neuroprocessor can be programmed to compress neural data using a sparse representation of neural signals via lifting discrete wavelet transform (DWT) and/or perform on-the-fly spike sorting on the compressed data stream if followed by a “smart” thresholding mechanism. This unique feature reduces the overall system latency and permit instantaneous decoding of neural signals to take place in real-time. The neuroprocessor therefore uses the limited telemetry bandwidth more efficiently while preserving important information in the neural data, and hence improves the practicality and viability of implantable microelectrode arrays to accelerate their deployment in clinical applications of brain-machine interfaces.