A circular recessed channel lighting system having a closed-loop channel section with a U-shaped channel having two parallel sides, first and second flange elements, each flange element extending from an end of one of the parallel sides of the U-shaped channel, an LED positioned within the U-shaped channel, and a flexible lens positioned over an open end of the U-shaped channel to allow light from the LED outward. The flange elements include through holes for adhesion of a building material (e.g., joint compound) and the U-shaped channel has a depth not greater than ⅝ inches (0.625 inches).