An insulated glass (IG) assembly for windows which includes an internal lighting system is disclosed. The IG assembly includes two or more panes of glass, a spacer and a strip of light emitting diodes (LEDs). The spacer separates glass panes and provides the hermetic seal for the IG assembly. The spacer extends around the periphery of the glass panes with a portion of its ends overlapping to form a sealed corner joint. The LED light strip includes a plurality of LED lamps connected in series by thin electrical contact wires fixed in a flexible nonconductive substrate. The LED strip is fixed to the spacer and extends around the periphery of the insulated glass unit. The lead wires from the LED light strip pass through the corner joint between the overlapped ends of the spacer. The LED light systems provide dependable illumination but emit relatively little thermal energy. Consequently, the LED light system maintains the thermal insulating properties of an insulated glass unit. The IG assembly can be incorporated into top and side lite windows or incorporated directly into doors themselves.