Devanagari is the most widely used script in India. Here, a method is introduced for recognizing Devanagari characters using Neural network. The proposed method reduces the number of output unit necessary for a conventional neural network where the classification is based on a winner take all basis. An automatic coding procedure for representing the output layer of the network and a different method for the final classification is also proposed. Along with the automatic coding procedure, a heuristic method for representing the output units by exploiting the structural information of Devanagari character is also demonstrated. Besides, it has been shown by random representation of the output layer that the representation effects the generalization/performance of the network. The proposed automatic representation gave the recognition rate of 98.09% for 44 categories.