Mid-wave infrared(MWIR) and long-wave infrared(LWIR) two-band scene simulation system is a kind of testing equipment that used for infrared two-band imaging seeker. Not only it would be qualified for working waveband, but also realize the essence requests that infrared radiation characteristics should correspond to the real scene. Past single-digital micromirror device (DMD) based infrared scene simulation system does not take the huge difference between targets and background radiation into account, and it cannot realize the separated modulation to two-band light beam. Consequently, single-DMD based infrared scene simulation system cannot accurately express the thermal scene model that upper-computer built, and it is not that practical. To solve the problem, we design a dual-DMD based, dual-channel, co-aperture, compact-structure infrared two-band scene simulation system. The operating principle of the system is introduced in detail, and energy transfer process of the hardware-in-the-loop simulation experiment is analyzed as well. Also, it builds the equation about the signal-to-noise ratio of infrared detector in the seeker, directing the system overall design. The general design scheme of system is given, including the creation of infrared scene model, overall control, optical-mechanical structure design and image registration. By analyzing and comparing the past designs, we discuss the arrangement of optical engine framework in the system. According to the main content of working principle and overall design, we summarize each key techniques in the system.