We have proposed a compact, yet high ambient contrast ratio augmented reality (AR) system by incorporating a tunable transmittance liquid crystal (LC) cell and a thin functional reflective polarizer. The broadband polarization-independent guest–host LC cell can change the transmittance from ~73% to ~26% with merely 8 V. Its response time (~50 ms) is at least 10× faster than that of photochromic materials used in commercial transition glasses. Combining the LC cell with a light sensor, the tunable transmittance LC cell can efficiently improve the ambient contrast ratio of the AR system under different lighting conditions. Meanwhile, the functional reflective polarizer works similarly to a polarizing beam splitter, except that it is much more compact and lighter weight. With some modification, we also designed a functional reflective polarizer to help people with color vision deficiency.