Recognition of similar (confusion) characters is a difficult problem in optical character recognition (OCR). In this paper, we introduce a neural network solution that is capable of modeling minor differences among similar characters, and is robust to various personal handwriting styles. The Self-growing Probabilistic Decision-based Neural Network (SPDNN) is a probabilistic type neural network, which adopts a hierarchical network structure with nonlinear basis functions and a competitive credit-assignment scheme. Based on the SPDNN model, we have constructed a three-stage recognition system. First, a coarse classifier determines a character to be input to one of the pre-defined subclasses partitioned from a large character set, such as Chinese mixed with alphanumerics. Then a character recognizer determines the input image which best matches the reference character in the subclass. Lastly, the third module is a similar character recognizer, which can further enhance the recognition accuracy among similar or confusing characters. The prototype system has demonstrated a successful application of SPDNN to similar handwritten Chinese recognition for the public database CCL/HCCR1 (5401 characters x200 samples). Regarding performance, experiments on the CCL/HCCR1 database produced 90.12% recognition accuracy with no rejection, and 94.11% accuracy with 6.7% rejection, respectively. This recognition accuracy represents about 4% improvement on the previously announced performance. As to processing speed, processing before recognition (including image preprocessing, segmentation, and feature extraction) requires about one second for an A4 size character image, and recognition consumes approximately 0.27 second per character on a Pentium-100 based personal computer, without use of any hardware accelerator or co-processor.