The rendering of mutual occlusion in optical see-through headmounted displays (OST-HMDs) poses several complex challenges. This paper discusses in detail these challenges and presents a novel optical architecture for enabling a compact, high performance, occlusion-capable optical see-through headmounted display (OCOST-HMD) with correct, pupil-matched viewing perspective. The proposed design utilizes a single-layer, double-pass architecture, offering a compact OCOST-HMD solution to alleviate several of the main issues facing the stateof-art OST-HMDs today. Our design is capable of rendering per-pixel mutual occlusion with correct viewing perspective between virtual and real views while achieving a very wide seethrough field of view (FOV) in a wearable formfactor. Based on this optical architecture, we design and build a compact binocular prototype. The prototype offers a virtual display with an FOV of 34° by 22° with a wide see-though FOV of 90° by 50°, within which about 40° diagonally is occlusion-enabled. Further, the prototype system affords an angular virtual display resolution of 1.06 arc minutes per pixel, along with a modulated optical see-through angular resolution of 1.0 arc minutes.