This paper presents a system development environment for embedded applications based on custom-computing machines implemented in field programmable logic devices (FPLDs). The concept uses the fact that FPLDs enables convenient way for implementing customised and reconfigurable digital systems. The custom-computing machines are based on a flexible instruction execution unit, which is a general-purpose microprocessor that allows addition of more complex processing elements in the form of functional units. The system development environment contains a number of tools that allow high-level description of the both processor core and functional units and produces VHDL synthesisable code, which can be processed by any VHDL compiler, and automatic generation of all basic software development tools such as customised cross-assembler and C compiler.