Digital micro-mirror device (DMD) has the advantages of high refresh rate and high diffraction efficiency, and it is an ideal dynamic computer-generated hologram loader. Light-emitting diode (LED) is chosen as light source to replace the laser, since it can effectively reduce the speckle noise caused by both temporal and spatial coherence of laser. A holographic display system using LED as light source and DMD as computer-generated hologram loader is proposed in this paper. The modulation characteristics of DMD as a hologram display device are studied and the reason why worse image quality caused by LED chosen as represention light source is analyzed. The impact of coherence and collimation of LED on reconstruction image quality is analyzed. Numerical simulation results verify the above analysis. According to the results, a color filter and a spatial filter are used to improve the coherence of LED and an aspheric collimation lens is used to improve the optical efficiency. The experimental results show that the system has good display quality.