The trade-off between the spatial resolution and field of view is one major limitation of state-of-the-art laparoscopes. In order to address this limitation, we demonstrated a multiresolution foveated laparoscope (MRFL) which is capable of simultaneously capturing both a wide-angle overview for situational awareness and a high-resolution zoomed-in view for accurate surgical operation. In this paper, we focus on presenting the optical design and system engineering process for developing the MRFL prototype. More specifically, the first-order specifications and properties of the optical system are discussed, followed by a detailed discussion on the optical design strategy and procedures of each subsystem. The optical performance of the final system, including diffraction efficiency, tolerance analysis, stray light and ghost image, is fully analyzed. Finally, the prototype assembly process and the final prototype are demonstrated.