A diffraction limited optical system for head mounted displays (HMDs) was designed. This optical system consists of four modules, including 1:5 mm and 5:30 mm beam expanders, polarization gratingpolarization conversion system (PG-PCS) and refractive/diffractive projection optical module. The PG-PCS module transforms the unpolarized Gaussian beam to a linearly polarized beam and it simultaneously homogenizes the spatial intensity profile. The optical projector module has a 30° field of view, a 22 mm eye relief, and a 10 mm exit pupil diameter with a compact structure. Common acrylic materials were utilized in the optical design process; therefore, the final optical system was lightweight. The whole optical system is suitable for a 0.7 inch liquid crystal on silicon microdisplay (LCOS) with HDTV resolution (1920×1080) and 8.0 μm pixel pitch.