We are proposing a novel optical see-through head- worn display that is capable of mutual occlusions. Mutual occlusion is an attribute of an augmented reality display where real objects can occlude virtual objects and virtual objects can occlude real objects. For a user to achieve the perception of indifference between the real and the virtual images superimposed on the real environment, mutual occlusion is a strongly desired attribute for certain applications. This paper presents a breakthrough in display hardware from a mobility (i.e. compactness), resolution, and a switching speed based criteria. Specifically, we focus on the research that is related to virtual objects being able to occlude real objects. The core of the system is a spatial light modulator (SLM) and polarization-based optics which allow us to block or pass certain parts of a scene which is viewed through the head-worn display. An objective lens images the scene onto the SLM and the modulated image is mapped back to the original scene via an eyepiece. We are combining computer generated imagery with the modulated version of the scene to form the final image a user would see.