The Alchemy Au1200 chip is due to ship in the second quarter of 2005 at speeds of up to 500MHz.
AMD says the chip is optimised to support mobile devices such as personal media players, and could power the video equivalent of a digital music player such as the iPod.
"The explosive growth of MP3 players illustrates the desire consumers have for entertainment on the go," said Iain Morris, senior vice president of AMD's personal connectivity solutions group, in a statement on Monday.
"The natural progression to the next 'must have' portable entertainment device is a video equivalent to the MP3 player, albeit with a slightly different user model," explained Morris.
AMD says the processor will make it easier for users to transfer content onto a portable video player. Devices built around the Alchemy processor will be able to connect directly with digital video recorders eliminating the need to process the content through a PC.
The Au1200 will be able to display DVD-quality content at a maximum resolution of 1024x768, and will support the MPEG 2, MPEG 4, WMV 9, H.263 and DivX file formats. Rated at below 400mW, the chip also draws little power.
TiVo is working with AMD on its TiVo-To-Go project, which will let customers transfer programmes easily from one of its personal video recorders onto a mobile device.
GoVideo, a maker of consumer electronics devices, has said it will use the Au1200 in future portable video players.
Following the huge success of Apple's iPod range, and similar devices from the likes of Creative Labs, some in the technology industry believe that portable video players will enjoy similar popularity in the next few years. Steve Jobs, though, has denied that Apple is working on a video iPod.