The effect of LED light source on modulation performance of grating light modulator (GLM) is discussed. Based on partially coherent light theory, simulation by MATLAB software shows LED light sources bandwidth will affect the image contrast greatly. If the bandwidth is reduced by filter to 13 nm, the image contrast will be 150, and if the bandwidth decreases to 10 nm, the contrast will be 225. Furthermore, if the ratio of the size of light source and the distance between GLM and light source is less than 0.03, the size of light source will not influence the optical information processing. The research results are testified by experiments. These results prove the feasibility of LED as the light source to GLM.