We report the effect of chemical etching of p-GaN using molten KOH:NaOH solution on leakage currents, light output power, and electrostatic discharge (ESD) characteristics of GaN light-emitting diodes (LEDs). Photoluminescence and capacitance-voltage measurement indicated that a deep donor-acceptor pair (DDAP) was densely concentrated near the p-GaN surface region (similar to 18 nm) and the defects were effectively removed by a chemical etching process, resulting in a remarkable reduction of defect-assisted leakage current on the forward and reverse bias, and improved light output power due to enhanced injection efficiency in etched GaN LEDs. The negative-voltage ESD characteristics of etched GaN LEDs were also improved due to the decrease in DDAP defects near the surface region of p-GaN.