This article provides steps to install Windows 11 as a guest Operating System on Workstation Pro/Player and Fusion.

VMware Fusion 12.x
VMware Fusion 12.2.1
VMware Workstation Player 16.x (Windows)
VMware Workstation Player 16.2.1 (Linux)
VMware Workstation Pro 16.2.1 (Linux)
VMware Workstation Pro 16.x (Linux)
VMware Workstation Player 16.x (Linux)
VMware Workstation Pro 16.2.1 (Windows)
VMware Workstation Pro 16.x (Windows)
VMware Workstation Player 16.2.1 (Windows)

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Workaround:
While the fix is being worked on, you can resolve the issue through a workaround.

Note: Minimum Requirement by Microsoft to run Windows 11 requires TPM support.

Process to Install Windows 11 in a virtual machine using Windows 11 ISO image:

1. While installing a new Guest OS, Select the OS type as "Windows 10 and later x64".
2. Before starting the installation, Configure default settings of Virtual Machine to be created in-order to match the minimum system requirements for Windows 11, Check here https://www.microsoft.com/en-in/windows/windows-11-specifications

• To configure Processor and RAM requirements : Go to Guest VM settings -> Processors & Memory.
• For Storage memory: Go to Guest VM Settings -> Hard Disk -> Increase the Disk Size as per minimum requirement.
• Enable UEFI, Secure Boot capable: Go to Guest VM settings -> Advanced                                         

3. With regards to Microsoft’s minimum requirement of TPM, there are three ways to install Windows 11.

   A. Use the Software feature by updating the vmx file:

• Before starting the installation process. Edit the vmx file for the newly created VM and add managedVM.autoAddVTPM = "software"

Note: Follow the below Knowledge base articles to edit the vmx file

For Fusion: Editing the .vmx file for your VMware Fusion virtual machine
For Workstation: Editing the .vmx file of a VMware Workstation and VMware Player virtual machine
 

• After editing the vmx file, you need to restart Fusion/Workstation/Player.
• After restarting, start the Guest VM and let the installation process continue.

Note: There will be no issue related to the minimum requirement of windows 11, the VM should install and boot fine. However, this feature is currently an experimental feature that boasts a reduced performance impact by employing a new encryption model as well as several new options for managing Fusion and Workstation installations at scale.

2.  Enabling Encryption on Guest VM and then adding vTPM device. Please note this will encrypt complete VM. (this can only be done on VMware Fusion and WS Pro, as Workstation Player doesn't have support of TPM device)
3. Passing TPM check. It's the only way to run Windows 11 on Workstation Player and this will work on Workstation Pro and Fusion as well.

To Enable Encryption please see below documents:

For Fusion: https://docs.vmware.com/en/VMware-Fusion/12/com.vmware.fusion.using.doc/GUID-C0886101-1C5E-433C-8D40-5B01D0A1295C.html

For Workstation: https://docs.vmware.com/en/VMware-Workstation-Pro/16.0/com.vmware.ws.using.doc/GUID-8A64D0EF-CB0E-4C50-A034-3FD5C0A0F905.html

Note: In case you have enabled Encryption on the guest Virtual Machine and have added vTPM device from VM settings before proceeding with installation then below steps are not required. Windows 11 will install fine with those settings.

In case you do not want to Encrypt the Virtual Machine, then to bypass the TPM 2.0 requirements while installing Windows 11, Please follow the below steps:

1. While installing Windows 11, if your computer does not meet the hardware requirements, you will see a message stating, "This PC can't run Windows 11." Windows 11 setup blocked due to missing hardware requirements. 
2. When you see the above message, press Shift+F10 (Or Shift+fn+F10) on your keyboard at the same time to launch a command prompt. At the command prompt, type regedit and press enter to launch the Windows Registry Editor.
3. When the Registry Editor opens, navigate to: HKEY_LOCAL_MACHINE\SYSTEM\Setup, Right-click on the Setup key and select New > Key.
4. When prompted to name the key, Type LabConfig and press enter.
5. Now right-click on the LabConfig key and select New > DWORD (32-bit) value and create a value named BypassTPMCheck, and set its data to 1. 
6. Once you configure the BypassTPMCheck key-value under the LabConfig key, close the Registry Editor, and then type exit in the Command Prompt followed by enter to close the window. You will now be back at the message stating that the PC can't run Windows 11. Click on the back button in the Windows Setup dialog, as shown below. Press the back button in Windows setup.
7. You will now be back at the screen prompting you to select the version of Windows 11 you wish to install. You can now continue with the setup, and the hardware requirements will be bypassed, allowing you to install Windows 11.

Process to upgrade the Virtual Machine from Windows 10 to Windows 11:

1.  Make sure the system is meeting minimum requirements.

You can use Microsoft's pchealthcheck tool from here https://www.microsoft.com/en-in/windows/windows-11#pchealthcheck and check if system meets the minimum requirements.

2. In case your system does not meet the minimum requirements. Before starting the upgrade, Shutdown the Guest VM and Modify the default settings of the Virtual Machine to match the minimum system requirements for Windows 11, Check here: https://www.microsoft.com/en-in/windows/windows-11-specifications

• To configure the Processor and RAM requirements : Go to Guest VM settings -> Processors & Memory. 
• For Storage memory : Go to Settings -> Hard Disk -> Increase the Disk Size as per minimum requirement.
• Enable UEFI, Secure Boot capable. (Go to settings -> Advanced)

3. In case the Guest Virtual Machine is not Encrypted, Make sure to enable encryption and add vTPM device.

After that please follow Microsoft Guidelines to update Windows 10 to Windows 11.
Either by using “Windows 11 Installation Assistant” or by directly using “Download Windows 11 Disk Image (ISO)” from this https://www.microsoft.com/en-in/software-download/windows11

Reference: https://support.microsoft.com/en-us/windows/ways-to-install-windows-11-e0edbbfb-cfc5-4011-868b-2ce77ac7c70e

NOTE: Please note Upgrade of Window 10 to Windows 11 will not be supported in Workstation Player as vTPM is not supported in Workstation player. hence, the only solution to run Windows 11 on Workstation player is to go via Fresh Install path.