In response to the growing industrial demand for light-emitting diode (LED) design professionals, based on industry-university collaboration in Taiwan, this paper develops a novel instructional approach: a simulation-based learning course with peer assessment to develop students' professional skills in LED design as required by industry as well as to enhance cognition and metacognition in students in higher education. The simulation-based learning course enables students to understand the influences on LED performance of the variation of different parameters and to seek the best design through comparing the effectiveness of different combinations of parameters. The evaluation results of pre- and post-test knowledge maps and a photonics scoreboard indicate that this project-based instruction may help students understand the operating principles of LEDs and enhance their skill in LED design. The Constructivist Project-based Learning Environment Survey is adopted to demonstrate that the proposed project-based learning environment is beneficial in cultivating student inquiry learning, reflective thinking, teamwork, and skills in creative problem solving.