The Prototype Segmented Mirror Telescope is a 1.3 m aperture, seven segment telescope, being developed as a technology demonstrator for India’s large optical-IR telescope project. For this segmented mirror telescope, a Shack Hartmann sensor based alignment device has been designed and developed. The device not only precisely captures the segment misalignment but also measures the segment focus error with an accuracy of a few microns and hence helps in the tip-tilt correction and co-focusing of the mirror segments. The device is designed to work primarily in two different modes: the Shack–Hartmann mode and the imaging mode. After completion of the alignment procedure, the final image quality can be checked in the imaging mode. The device is designed in such a way that it also has a provision to conduct the Keck kind of phasing experiment with one pair of mirror segments. To make the device cost effective, only off-the-shelf components are used. The optical design and opto-mechanical analysis of the device were carried out using Zemax and SolidWorks software. Then, the device was realized and its extensive testing was carried out in the laboratory. Here, we have presented the details of the opto-mechanical design and analysis as well as the preliminary results of performance tests conducted in the laboratory.