LED lighting using optical elements with spectral notching is disclosed. Embodiments of the invention provide an optical element and LED devices and systems using such an optical element, where spectral notch filtering introduced by the optical element improves the color rendering index (CRI) of emitted light. In some embodiments of the invention, the optical element is made to act as a notch filter by including a rare earth compound such as neodymium oxide in or on the material of which the optical element is made. A color pigment can also be used to impart notch-filtering properties to an optical element. An optical interference film can also be used. The optical element may be included in an LED device such as a multichip component or may be used as an enclosure or reflector for an LED lighting system such as a lamp or fixture.