A research and development activity on an Image Slicer System for Integral Field Spectroscopy is conducted with possible applications on future instrumentation for major ground-based (VLT second-generation instruments) and space (NGST, SNAP) observatories. These instruments need high-photometric accuracy, compactness and will possibly work under cryogenic environment, while multi-integral field units may require mass production. Several prototypes have been manufactured since March 2000. This paper provides an overview of the difficulties and limits of the design for different applications, and will describe technology developments and performance evaluation. In particular, the assembly of Zerodur micro-optical elements required an original method of assembly using high precision molecular adhesion, in order to comply with optical tolerances. Following the exact characteristics of the optical elements, diffraction and straylight analyses have been performed in the NIR range. It was found that diffraction effects due to the image slicer induce energy losses less than a few percents and do not induce any crosstalk between pseudo-slits. With a good baffling, scatter can be controlled to minimize the background increase to less than 10-4 times the incident flux.© (2003) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.