The 8085 microprocessor determines the size of an instruction through its instruction decode logic, which is specifically designed to handle multibyte instructions. When a multibyte instruction is encountered, the microprocessor performs additional byte fetches from memory to accurately interpret the instruction. This mechanism ensures that the microprocessor can process both single-byte and multibyte instructions effectively. Understanding this decoding process is crucial for programming and optimizing applications on the 8085 microprocessor. The design of the instruction fetch and decode logic is fundamental to the microprocessor's operation.