Light Emitting Diodes (LEDs) have progressed in recent years from being indicators to emitting enough light for illumination applications. This has opened a new field for LED applications, resulting in significant advantages over conventional light sources and creating some application challenges unique to LEDs. Methods used in the past for packaging LEDs, such as the T1 (3)/(4) or 5 mm. through-hole package, were suitable for the indication LEDs but have proved poor for high brightness LEDs driven at relatively high power due to temperature rises. Conventional lighting methods provide little guidance for LED thermal problems since these usually involve a very high temperature source, such as a filament or an arc, and radiant heat transfer dissipates the thermal energy. A typical incandescent bulb, for example, radiates 85-95% of the thermal energy away; the remainder is dissipated by conduction to the socket or naturally convected to the atmosphere. LED junction temperatures are limited to much lower values and hence the heat transfer system cannot depend upon radiant energy transfer. This means the cooling methods for lighting now shift from primarily radiation to conduction and natural convection, and this is paradigm shift that lighting designers must recognize when moving to LEDs. In this presentation, the thermal challenges facing LED lighting applications are discussed. Developments in packaging of die into Level 1 products are shown, and the thermal challenges of high brightness LED applications caused by the paradigm shift of heat transfer methods for lighting are discussed.