LEDs are usually built on an n-type substrate, with an electrode attached to the p-type layer deposited on its surface. P-type substrates, while less common, occur as well. Many commercial LEDs, especially GaN/InGaN, also use sapphire substrate. Substrates that are transparent to the emitted wavelength, and backed by a reflective layer, increase the LED efficiency. The refractive index of the package material should match the index of the semiconductor, otherwise the produced light gets partially reflected back into the semiconductor, where it may be absorbed and turned into additional heat, thus lowering the efficiency.

This type of reflection also occurs at the surface of the package if the LED is coupled to a medium with a different refractive index such as a glass fiber or air. The refractive index of most LED semiconductors is quite high, so in almost all cases the LED is coupled into a much lower-index medium. The large index difference makes the reflection quite substantial , and this is usually one of the dominant causes of LED inefficiency. Often more than half of the emitted light is reflected back at the LED-package and package-air interfaces. The reflection is most commonly reduced by using a dome-shaped (half-sphere) package with the diode in the center so that the outgoing light rays strike the surface perpendicularly, at which angle the reflection is minimized. An anti-reflection coating may be added as well. The package may be cheap plastic, which may be colored, but this is only for cosmetic reasons or to improve the contrast ratio;the color of the packaging does not substantially affect the color of the light emitted. Other strategies for reducing the impact of the interface reflections include designing the LED to reabsorb and reemit the reflected light (called photon recycling) and manipulating the microscopic structure of the surface to reduce the reflectance, either by introducing random roughness or by creating programmed moth eye surface patterns.