We describe the instrument concept of a high angular resolution telescope dedicated to the sub-GeV (from ≥10 MeV to ≥1 GeV) gamma-ray photon detection. This mission, named PANGU (PAir-productioN Gamma-ray Unit), has been suggested as a candidate for the joint small mission between the European Space Agency (ESA) and the Chinese Academy of Science (CAS). A wide range of topics of both astronomy and fundamental physics can be attacked with PANGU, covering Galactic and extragalactic cosmic-ray physics, extreme physics of a variety of extended (e.g. supernova remnants, galaxies, galaxy clusters) and compact (e.g. black holes, pulsars, gamma-ray bursts) objects, solar and terrestrial gamma-ray phenomena, and searching for dark matter decay and/or annihilation signature etc. The unprecedented point spread function can be achieved with a pair-production telescope with a large number of thin active tracking layers to precisely reconstruct the pair-produced electron and positron tracks. Scintillating fibers or thin silicon micro-strip detectors are suitable technology for such a tracker. The energy measurement is achieved by measuring the momentum of the electrons and positrons through a magnetic field. The innovated spectrometer approach provides superior photon pointing resolution, and is particular suitable in the sub-GeV range. The level of tracking precision makes it possible to measure the polarization of gamma rays, which would open up a new frontier in gamma-ray astronomy. The frequent full-sky survey at sub-GeV with PANGU's large field of view and significantly improved point spread function would provide crucial information to GeV-TeV astrophysics for current/future missions including Fermi, DAMPE, HERD, and CTA, and other multi-wavelength telescopes.