A thermo-mechanical MEMS detector with 35-mu m pixel pitch is designed, fabricated, and characterized. This fabricated design has one of the smallest pixel sizes among the IR thermo-mechanical MEMS sensors in the literature. The working principle of the MEMS detector is based on the bimaterial effect that creates a deflection when exposed to IR radiation in the 812-mu m waveband. The nanometer level out of plane mechanical motion is observed in response to IR heating of the pixel, which is detected by a diffraction grating-based optical readout. Performance of MEMS sensor arrays with optical readout have been limited by a large DC bias that accompanies a small AC signal. We developed a novel optical setup to reduce the DC term and the related noise using an AC-coupled detection scheme. Detailed noise characterization of the pixel and the readout system is reported in this paper. The noise equivalent temperature difference of our detector is measured as 216 mK using f/0.86 lens with the AC-coupled optical readout. Finally, we obtained a thermal image using a single MEMS pixel combined with a scanning configuration. Despite the reduced pixel size, the measured noise levels are comparable to the state-of-the-art thermo-mechanical IR sensors.