Create a new document in Illustrator. To draw a star, select the Star tool and type a size and press OK. Keeping a distance from the previous star again click the tool and draw a second star of the same size.
Choose the Blend tool (W) and click on the top of the first star. Then, click Option (Alt-click on PC) on the top point of the second star. From the dialog box that opens, select Specified Steps from the Spacing popup and give 11 steps (One more than you actually need. You’ll see why later).
Click on the Ellipse tool (L) and draw a circle.
Then select the circle and the Blend and mark them both with the Selection tool. To replace the spine go to Object>Blend>Replace Spine. Now the circle will be the new spine of the Blend.
The stars will now almost follow the circle but not fully. To solve this, you need to turn on the Smart Guides (View> Smart Guides) if they are not on. Now select the circular spine using Group Selection tool (hidden under the Direct Select tool). Then choose the Scissors tool (C) and click on the top central anchor point of the circle to cut it to make it an open path. Now the spine has a beginning and an end and the stars will stretch around to form the entire circle. The last star will be placed directly above the first. (That’s the reason for the extra Specified Step in the Blend).
Add the finishing touches. And sit back and marvel your work! You’ve just made the impossible possible.