One-hot encoding is a way to represent the target variables or classes in case of a classification problem. The target variables can be converted from the string labels to one-hot encoded vectors. A one-hot vector is filled with 1 at the index of the target class but with 0 everywhere else. For example, if the target classes are cat and dog, they can be represented by [10] and [01], respectively. For 1,000 classes, one-hot vectors will be of size 1,000 integers with all zeros but 1. It makes no assumptions about the similarity of target variables. With the combination of one-hot encoding with softmax explained in the following section, multi-class classification becomes possible in ANN.