Hello devidasbkarale!
Interfacing XBEE Pro with Atmel controller is very easy.
All you have to do is
1- connect Rx pin of ATMega16 with Pin 2 of XBEE directly because XBEE's signal would be 3.3V and ATMega16 accepts signal at the level of 3.3V.
2- connect Tx pin of ATMega16 with Pin 3 of XBEE provided that there should be two resistor in line. one resistor of 1.8Kohms in series and one 3.3Kohms in parallel after first resistor. Now if u see, after 1st resistor, the 2nd resistor (3.3K) would be parallel to pin 3 and ground of XBEE. (to drop 5V signal to 3.3V)
3- Use switch mode power supply regulator idealy LM2576-3.3 is easily available in the market which is best source to provide 3.3V with 470uF inductor, 1N5822 fast switching diode 470uF cap at input and 680uF cap at output of LM2576-3.3. Remember must use 100uF cap across Vcc and Ground of XBEE. see datasheet of LM2576.
For any other detail, please feel free to ask.
Regards
Assad Mahmood