Wind and temperature observation in near space has been playing an increasingly important role in atmospheric physics and space science. This paper reports on the near-space wind and temperature sensing interferometer (NWTSI), which employs a wide-angle Michelson interferometer to observe O-2(a(g)(1)) dayglow near 1.27 m from a limb-viewing satellite, and presents the instrument modeling and observation simulations from the stratosphere to the mesosphere and lower thermosphere. The characteristics of atmospheric limb-radiance spectra and line selection rules are described. The observational strategy of using two sets of three emission lines with a line-strength difference of one order of magnitude is proved to be suitable for extending altitude coverage. The forward modeling and measurement simulation of the expected NWTSI observations are provided, and the measurement uncertainty of the wind and temperature is discussed. The signal-to-noise ratio (SNR) and the limb-view weight work together to affect the precision of the wind and temperature measurements. The simulated results indicate a wind measurement precision of 1 to 3 m/s and a temperature precision of 1 to 3 K over an altitude range from 40 to 80 km, which meets the observing requirement in measurement precision for near-space detection.