Laser diodes (LD) are commonly used for optical neural recordings in chronically recorded animals and humans, primarily due to their brightness and small size. However, noise introduced by LDs may counteract the benefits of brightness when compared to low-noise light-emitting diodes (LEDs). To understand noise sources in optical recordings, we systematically compared instrument and physiological noise profiles in two recording paradigms. A better understanding of noise sources can help improve optical recordings and make them more practical with fewer averages. We stimulated lobster nerves and a rat cortex, then compared the root mean square (RMS) noise and signal-to-noise ratios (SNRs) of data obtained with LED, superluminescent diode (SLD), and LD illumination for different numbers of averages. The LED data exhibited significantly higher SNRs in fewer averages than LD data in all recordings. In the absence of tissue, LED noise increased linearly with intensity, while LD noise increased sharply in the transition to lasing and settled to noise levels significantly higher than the LED’s, suggesting that speckle noise contributed to the LD’s higher noise and lower SNRs. Our data recommend low coherence and portable light sources for in vivo chronic neural recording applications.