LEDs have existed for decades, mainly as low-power indicator lights. In 1999, Lumileds Corporation of San Jose, California United States, introduced the Luxeon LED, a high-power white-light emitter. For the first time this made possible LED flashlights with power and running time better than some incandescent lights. The first Luxeon LED flashlight was the Arc LS in 2001.

LEDs can be significantly more efficient than incandescent lamps at lower power levels and so use less battery energy than ordinary lightbulbs. Such flashlights have longer battery lifetimes, in some cases hundreds of hours, although the LED efficiency advantage diminishes at higher power levels. LEDs also survive sharp blows that often break conventional lightbulbs.

LED flashlights are often electronically regulated to maintain constant light output as the batteries are depleted. By contrast, the output of a non-regulated flashlight changes proportionally to the voltage of the battery, resulting in a significant decline in output as battery capacity - and thus voltage - drops as the flashlight is used. LEDs also have the advantage of maintaining a specific color temperature regardless of input voltage or current, while the color temperature of an incandescent bulb declines with the power available.

While lower-power LED flashlights generate little heat, more powerful LED lights do generate significant amounts of heat – although not as radiant energy, as the semiconductor junction inherently dissipates heat. For this reason higher-powered LED flashlights usually have aluminum bodies and can become quite warm during use. The aluminum bodies act as a heatsink for the high-power LED. Very few high-output LED flashlights use a plastic body, since plastics do not conduct heat as well as metals.