A multifunctional forceps-scissors instrument is designed for minimally invasive surgery. The device is a compliant mechanism capable of both grasping and cutting. The focus of the paper is on the design optimization and a detailed finite element analysis of the compliant mechanism. One-half of the symmetric compliant mechanism is modeled as a cantilever beam of rectangular cross-section undergoing large deformation. The optimization problem is solved graphically where all feasible designs (i.e., those that satisfy the stress and geometric constraints) are displayed on performance space plots. Using this method it is easy to visualize the performance space and to select a suitable design; however, it is found that it is not possible to simultaneously maximize free deflection and blocked force in the forceps or scissors modes. A detailed finite element analysis was conducted using ANSYS to model the multiple loading conditions. A prototype instrument, fabricated from stainless steel using wire EDM with the precision of +/- 2 μm, has been tested for comparison of actual and predicted results.