An exception handling system is used, in an exemplary embodiment, to provide exception handling for prefetched instruction bytes in a pipelined 486-type microprocessor. The microprocessor includes a prefetch unit (22) that controls the loading of a prefetch queue (24), including appending a valid bit to each prefetched instruction byte--this valid bit is conventionally used to notify an instruction decoder (26) that a transferred instruction byte is not valid (such as resulting from a change of flow), causing the decoder to signal a stall condition. According to the exception handling technique of the invention, if the prefetch unit detects that any of a selected number of exception conditions (such as limit violations and page faults) applies to a prefetched instruction byte, it invalidates that instruction byte by clearing the valid bit. When an invalid instruction byte is decoded, the decoder asserts a stall condition that can result from either: (a) the prefetch queue is invalid due to instruction bytes being unavailable or flushing in response to a branch, or (b) an exception condition. An exception processor (30) performs two basic functions: (a) monitoring the prefetch unit, and for any instruction byte for which a potential exception condition exists, storing in an exception status register the associated exception status information (for example, limit violation or page fault), and (b) monitoring the decoder to detect stall conditions. For each stall condition detected, the exception processor checks the exception status register for valid exception status information--if so, it invokes the appropriate exception handling routine. Thus, exception handling occurs at decode time, rather than after execution (requiring instruction abort and side effect handling).