The design of a head-mounted display with a field of view of 40 degrees and suitable for use with a micro display of 17.5 mm diagonal is presented. It is a combination of a diffractive-refractive eyepiece with an appropriate reflective relay system. The eyepiece design is based on a Kellner eyepiece. By replacing the cemented-doublet of the traditional eyepiece with a diffractive-refractive element (a plano-convex lens with the plane surface as the diffractive surface) an improved eyepiece is obtained. The proposed eyepiece shows a considerable reduction in physical size (which is particularly important for binocular systems) and weight, and exhibits superior performance compared to the traditional refractive type. It is emphasized that the proposed design has a performance that is well matched to a micro display with SXGA resolution.