ISAAC is a 1.5 mu m imager/spectrometer currently under construction at ESO and scheduled for installation at one of the Nasmyth foci of the first 8m unit telescopes of the VLT in 1998. It comprises two cameras, optimized for the 1-2.5 mu m and 2-5 mu m wavelength ranges, which can be used to directly view the telescope focal plane or the intermediate spectrum formed by a grating spectrometer. The complete instrument is cryogenically cooled by means of a continuous now liquid nitrogen circuit and two closed cycle coolers and is housed in a - 1.5m diameter vacuum tank permanently attached to the Nasmyth adapter/rotator. The observing modes, instrument design, construction status and performance estimated using a recently developed software simulator of the instrument are described.