The liquid crystal spatial light modulator (LC SLM) is very suitable for wavefront correction and optical testing and can produce a wavefront with large phase change and high accuracy. The LC SLM is composed of thousands of pixels and the pixel size and shape have effects on the diffractive characteristics of the LC SLM. This paper investigates the pixel effect on the phase of the wavefront with the scalar diffractive theory. The results show that the maximum optical path difference modulation is 41 μm to produce the paraboloid wavefront with the peak to valley accuracy better than λ/10. Effects of the mismatch between the pixel and the period, and black matrix on the diffraction efficiency of the LC SLM are also analysed with the Fresnel phase lens model. The ability of the LC SLM is discussed for optical testing and wavefront correction based on the calculated results. It shows that the LC SLM can be used as a wavefront corrector and a compensator.