The Micro-Precision Interferometer Testbed is essentially a space-based Michelson interferometer suspended in a ground-based laboratory. The purpose of the testbed is to serve as a proving ground for technologies needed for future space-based missions requiring low- vibration environments. A layered control architecture, utilizing isolation, structural control, and active optical control technologies, allows the system to achieve its vibration attenuation goals. This paper focuses primarily on the optical design for the testbed and the systems-level tradeoffs between the optics and other systems due to the fact that the interferometer is on a large, lightly damped, flexible structure rather than on the ground. The testbed is designed to be a fully functioning interferometer spacecraft and makes use of flight-like hardware where possible, including an external star simulator, an attitude control system, fringe detection and tracking systems, delay lines, pointing control, laser metrology systems, and computers and electronic subsystems. The engineering decisions that led to the current optical configuration are presented and explained.