This diagram shows the main parts of the 8086 chip; dark labels are affected by HALT. The 8086 is partitioned into an Execution Unit which executes instructions, and a Bus Interface Unit which performs memory operations and preloads instructions into the prefetch queue.
Most 8086 instructions are implemented in microcode, but some are implemented in logic. The Group Decode ROM starts by categorizing instructions. The red rectangle detects 1-byte-logic instructions that don't use microcode. The yellow rectangle detects the HLT instruction.