The optical efficiency of an active matrix liquid crystal display (AMLCD) light valve projector is determined by the optical design, the method of modulation, and the efficiency of the light source. This paper describes a new projector with an efficient modulation technique, which can employ unpolarized light by using a unique diffraction grating formed in a liquid crystal panel. The technique uses a Schlieren optical system and has been tested with xenon arcs, metal halide arcs, and efficient solid-state laser light sources. The optical system reduces laser speckle significantly when highly coherent laser sources are used. All source combinations exceeded 3 lm/W for white light projection performance, and the experimental results of the combinations are discussed. This modulation technique obtains a high contrast ratio with smaller panels than can be achieved with rotation-of-polarization light valve projectors.