The Spaceborne Infrared Atmospheric Sounder for Geosynchronous Earth Orbit (SIRAS-G) is an infrared imaging spectrometer concept being developed to address future Earth observation from both low-earth and geosynchronous orbit. SIRAS-G is now in its second year of development as part of NASA's Instrument Incubator Program. The SIRAS-G approach offers lower mass and power requirements than heritage instruments while offering enhanced capabilities for measuring atmospheric temperature, water vapor, and trace gas column abundances at improved spatial resolution. The system employs a wide field-of-view hyperspectral infrared optical system that splits the incoming radiation to several grating spectrometer channels. Combined with large 2-D focal planes, this system provides for simultaneous spectral and high-resolution spatial imaging. In 1999, the SIRAS team built and tested the SIRAS LWIR spectrometer also under NASA's Instrument Incubator Program (IIP-1). SIRAS-G builds on this experience with a goal of producing a laboratory demonstration instrument operating in the MWIR including the telescope, a single spectrometer channel, focal plane and active cooling subsystem. In this paper, we describe the on-going development of this instrument concept, focusing on aspects of the optical design, fabrication and testing of the demonstration instrument, performance requirement predictions and potential future scientific instrument applications.