I have the below 2 files:

1) Third field from file1.txt should be compared to the first field of lookup.txt.
2) If match found then third field, file1.txt should be substituted with the second field from lookup.txt.
3)Else just print the line from file1.txt.

File1.txt:

|ABCD|1000|Jill|Smith|MD|
|ABCD|1001|Jack|Smith|MD|
|ABCD|1002|Mary|Smith|MD|
|ABCD|1003|Jill|Smith|MD|
|ABCD|AK10GFM|George|Foreman|MD|
|ABCD|2000|Akil|Roman|MD|

1000|NJ12JSM
1001|NJ34JSM
1002|NJ45MSM
1003|NJ12JSM
2000|PA10ARM

|ABCD|NJ12JSM|Jill|Smith|MD|
|ABCD|NJ45MSM|Mary|Smith|MD|
|ABCD|NJ12JSM|Jill|Smith|MD|
|ABCD|AK10GFM|George|Foreman|MD|
|ABCD|PA10ARM|Akil|Roman|MD|

awk 'BEGIN {FS=OFS="|"} NR==FNR{a[$1]=$2;next} $3 in a{print $0}' lookup.txt file1.txt

awk -F"|" 'NR==FNR{a[$1]=$2;next}{for(i=3;i<=NF;i++){if($i in a)sub($i,a[$i],$i)}print}' OFS="|" lookupfile contentfile

 
awk 'BEGIN {FS=OFS="|"} NR==FNR{a[$1]=$2;next} $3 in a{$3=a[$3];print $0}' lookup.txt file1.txt

Thanks for posting, but this code does only partial work.It should also print the line from file1.txt in case it's a mismatch.

 
awk 'BEGIN {FS=OFS="|"} NR==FNR{a[$1]=$2;next} $3 in a{$3=a[$3]};{print $0}' lookup.txt file1.txt

you would need to add else clause to situation when $3 in a is not found, such as below

Let me reformat the one-liner into a structured form:

gawk 'BEGIN {FS=OFS="|"}
{
        if(NR==FNR){
                a[$1]=$2;
                next
        }
        if($3 in a){
                $3=a[$3];
                print $0
        }
         else {
                print $0
        }
}'