The work on "Development of Smart Parking System for Reducing Parking Chaos" aims at elimination of the parking problems faced in the present world. It uses a Microcontroller8051 and a Metal detector to sense the presence of Vehicle parked in restricted parking zone and it alarms after a particular time span indicating the driver to vacate the premises. It also operates in the 2nd mode where it senses the presense of vehicle and can help greatly as an anti-theft device when it senses the absence or movement and triggers an alarm. A 5V source in needed to entire system and the modes of operations are selected as soon as the device is turned on. The microcontroller and the device is protected by a secure password which when entered would lead to locking or unlocking of the device in order to protect it from unauthorized operation. LEDs indicate the presence of the vehicle and buzzer triggers the alarm. All set of programming is done in the ATMEL 8051 Microprocessor.