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Transformation invariant automatic target recognition (ATR) has been an active research area due to its widespread applications in defense, robotics, medical imaging and geographic scene analysis. The primary goal for this paper is to obtain an on-line ATR system for targets in presence of image transformations, such as rotation, translation, scale and occlusion as well as resolution changes. We investigate biologically inspired adaptive critic design (ACD) neural network (NN) models for on-line learning of such transformations. We further exploit reinforcement learning (RL) in ACD framework to obtain transformation invariant ATR. We exploit two ACD designs, such as heuristic dynamic programming (HDP) and dual heuristic dynamic programming (DHP) to obtain transformation invariant ATR. We obtain extensive statistical evaluations of proposed on-line ATR networks using both simulated image transformations and real benchmark facial image database, UMIST, with pose variations. Our simulations show promising results for learning transformations in simulated images and authenticating out-of plane rotated face images. Comparing the two on-line ATR designs, HDP outperforms DHP in learning capability and robustness and is more tolerant to noise. The computational time involved in HDP is also less than that of DHP. On the other hand, DHP achieves a 100% success rate more frequently than HDP for individual targets, and the residual critic error in DHP is generally smaller than that of HDP. Mathematical analyses of both our RL-based on-line ATR designs are also obtained to provide a sufficient condition for asymptotic convergence in a statistical average sense.