In this paper a new illumination system with high power light emitting diode (LED) sources for projection displays is proposed. The prototype of a rear projection system has been developed by using red, green and blue (RGB) LEDs and three LCD panels. Four LEDs were used for each primary color. Parabola reflectors were used for collimating the LED lights and a new array style of LEDs and collimators were used. Integration rods were directly used between collimators and LCD panels without relay lens for uniform light distribution. A 40" projection display system was made with a light output about 25 lm on the screen and the projection engine was very small comparing to the original engine which uses an arc source.