An on-line handwritten character recognition technique based on a new HMM is proposed. In the proposed HMM, not only pen-direction feature but also pen-coordinate feature are separately utilized for describing the shape variation of on-line characters accurately. Specijcally speaking, the proposed HMM outputs a pen-coordinate feature at each inter-state transition and outputs a pen-direction feature at each intra-state transition, i.e., self-transition. Thus, each state of the proposed HMM can specify the starting position and the direction of a line segment by its incoming inter-state transition and intra-state transition, respectively. The results of recognition experiments on 10-stroke Chinese characters show that the proposed HMM outperforms the conventional HMM which does not use the pen-coordinate feature because of its non-stationarity.