Â© 2015 SPIE. Many important astrophysical processes occur at wavelengths that fall within the far-infrared band of the EM spectrum, and over distance scales that require sub-arc second spatial resolution. It is clear that in order to achieve sub-arc second resolution at these relatively long wavelengths (compared to optical/near-IR), which are strongly absorbed by the atmosphere, a space-based far-IR interferometer will be required. We present analysis of the optical system for a proposed spatial-spectral interferometer, discussing the challenges that arise when designing such a system and the simulation techniques employed that aim to resolve these issues. Many of these specific challenges relate to combining the beams from multiple telescopes where the wavelengths involved are relatively short (compared to radio interferometry), meaning that care must be taken with mirror surface quality, where surface form errors not only present potential degradation of the single system beams, but also serve to reduce fringe visibility when multiple telescope beams are combined. Also, the long baselines required for sub-arc second resolution present challenges when considering propagation of the relatively long wavelengths of the signal beam, where beam divergence becomes significant if the beam demagnification of the telescopes is not carefully considered. Furthermore, detection of the extremely weak far-IR signals demands ultra-sensitive detectors and instruments capable of operating at maximum efficiency. Thus, as will be shown, care must be taken when designing each component of such a complex quasioptical system.