AbstractWith the emergence of high‐dynamic range (HDR) image and video, displaying an HDR image or video on a standard dynamic range displays with natural visual effect, clear details on local areas, and high‐contrast ratio has become an important issue. To achieve HDR, local‐dimming technique has been commonly practiced. In this paper, we investigate the problem of local dimming for LED‐backlight LC display to provide algorithm support for developing HDR displays. A novel local‐dimming algorithm is proposed to improve the contrast ratio, enhance the visual quality, and reduce the power consumption of the LCDs. The proposed algorithm mainly consists of two parts. The first part is a backlight luminance extraction method based on dynamic threshold and the maximum grayscale of an image block to improve the contrast ratio and reduce the power consumption. In the second one, a pixel compensation method based on logarithmic function is used to improve the visual quality and contrast ratio. At the same time, in order to better smooth the backlight diffusion at the edges of the backlight luminance signal to enhance the accuracy of the pixel compensation, we draw on the idea of BMA and improve it to establish the backlight diffusion model with different low‐pass‐filter templates for different types of blocks. Simulation and measured results show that the proposed algorithm outperforms the competing ones in contrast ratio, visual quality, and power‐saving ratio.