The LOFAR telescope is being developed as a giant data-processing machine. A total of 13,000 antennas produce a datastream of 2 Gbit/sec each. This data is processed by a massive cluster computer and converted to astronomical images and other data-products using distributed applications. The LOFAR Data Processor will be designed as a heterogeneous system containing digital signal processors, programmable logic and general purpose microcomputers with a total processing power of 40 TFlops. To allow for iterative calibration over 600 TByte on-line storage is envisaged. LOFAR will be developed in a collaboration between the Netherlands (ASTRON) and the USA (NRL and MIT Haystack Observatory). Initial funding has been secured for a feasibility phase. Initial operations are planned for 2004, full capacity science operations for 2007.