Achieving good illumination performance in a compact illumination system is the main development direction of micro-projector. A compact illumination system of one chip Digital Light Processor (DLP) projector making use of LED light source is introduced based on the analysis of the DLP micro-projection display system. The length of the relay system is shortened to about 50 percent while the light spot is big enough for illuminating the 0.3 inch Digital Micromirror Devices (DMD). Meanwhile, two models of illumination system respectively based on an ideal point source and an extended surface source are simulated by ZEMAX software. The 500,000 threads tracing simulation results show that, our design can achieve uniform light spot in a relative small system size. The utility rate of luminous energy of this illumination system is about 33 percent.