Now-a-days, increasing no. of incidents of vehicle theft have become a major problem in society. To prevent vehicle theft we can install an embedded system in the vehicle which takes care of this thing. In this paper, we deal with design of an embedded system to prevent vehicle theft. The proposed system makes use of AVR (Advanced Virtual RISC) microcontroller interfaced with a GSM module. After installing the system in the vehicle, if the vehicle is being stolen then the owner can control the ignition, say it to lock the vehicle or stop the engine by communicating with the GSM module from a mobile phone. The owner can bring back the vehicle to normal condition after entering a secured password. Tracking of the vehicle is also possible due to the presence of SIM card in the GSM module. The system is designed in a single chip & the cost is very less.