The Stellar Absorption and Refraction Sensor (STARS) is a compact, large-aperture instrument that combines a UV-IR imaging spectrograph with a co-aligned visible-light imager to make simultaneous absorptive and refractive stellar occultation measurements. The absorption measurements provided by the spectrograph allow the determination of vertical profiles of atmospheric constituents. The coincident refraction observations made by the image yield high-precision measurements of atmospheric density, pressure, and temperature and provide independent knowledge of both the refracted light path and Rayleigh extinction, which are critical in reducing the uncertainty in the retrieved constituent profiles in the lower atmosphere. STARS employs a two-axis gimbaled telescope to acquire and track the star and a two-axis, high-precision, fast-steering mirror to correct for spacecraft jitter and maintain the star within the spectrograph field of view. The relative star position measured by the imager provides position feedback to the active tracking loop of the fast-steering mirror. With funding from NASA's Instrument Incubator Program, a laboratory facility has been developed to demonstrate the overall instrument performance and, in particular, its capability to acquire and track a setting, refracting, and scintillating star, to compensate for various degrees of platform jitter, and to provide the pointing knowledge required for accurate determination of the atmospheric quantities. The combination of built-in image tracking and motion compensation capabilities, small size, and limited spacecraft resource requirements makes STARS and its tracking mechanism suitable for deployment on existing and future commercial spacecraft platforms for applications that require high-precision pointing. In this paper, we present details of the instrument design and its expected performance based on our laboratory tests.