The recent technology in digital cameras uses single CCD or CMOS sensors as a substitute to three separate RGB sensors. Color camera consists of single CCD or CMOS sensor with an overlaid Color Filter Array (CFA). This paper proposes a novel approach of CFA demosaicing. In proposed approach, bilinear interpolation with sharpening filter is used for CFA demosaicing. The proposed work tested on Virtex 5 FPGA in real time mode as well as on true color test image database. Xilinx System Generator (XSG) has been used for system modeling and design implemented on target device FPGA. The results of proposed FPGA based work improved than software based simple bilinear interpolation, edge directed interpolation and adaptive color plane interpolation methods and comparative to modified adaptive color plane interpolation method. The proposed approach has low computational complexity and high image processing speed; hence the design can be implemented in real time low cost embedded system applications. © 2015 IEEE.