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In this paper, a novel two-dimensional adaptive dimming and current compensation technique with X-Y channels for light-emitting diode (LED) backlight system in LCD TVs is proposed . The proposed LED backlight has matrix structured LED modules with row and column switches to control the brightness of individual division block. It shows local dimming effects such as reduced power consumption and high dynamic contrast ratio even with much less number of LED drivers than that of the conventional two-dimensional local dimming method. Therefore, low cost and compact design of LED drivers can be achieved. This paper also contains a new adaptive dimming algorithm and image compensation technique for the proposed LED backlight system. Moreover, luminance difference among blocks caused by different I-V characteristics of LED and the luminance variation caused by temperature change are compensated by current sensing system. The proposed dimming technique is verified by simulation and experimental results based on a RGB-LED backlight of a 32-inch LCD TV.