We report the improved performance of InGaN/GaN-based light-emitting diodes (LEDs) through the design and the formation of the InGaNO interfacial layer, which maintains high reflectivity of silver and forms good ohmic contact between pristine silver and p-GaN. The interfacial layer was designed and formed by depositing a thin layer of indium tin oxide (ITO) on top of p-GaN, followed by thermal annealing, to enable the interdiffusion and the intermixing of In, Sn, Ga, O, and N atoms. Both electrical and optical performances of the LED with the optimized InGaNO interfacial layer are improved, thus achieving the highest wall-plug efficiency, compared with those LEDs with and without ITO layers at operation current.