This paper presents a novel instruction encoding generation technique for use in architecture exploration for application specific processors. The underlying exploration methodology is based on successive processor model refinement combined with simulation and profiling. Previous approaches require the tedious manual specification of binary instruction opcodes even at very early design stages due to the need to generate profiling tools. The proposed automatic technique eliminates this bottleneck in ASIP design. It is well adapted to the hierarchical processor modeling style of contemporary architecture description languages. Experimental evaluation for several real-life processor architectures confirms the practical applicability of the presented encoding techniques. Moreover, the results indicate that very compact instruction encoding schemes are generated that compete well with hand-optimized encodings.