Ledger's iconic performance in "The Dark Knight" won him a posthumous Academy Award for Best Supporting Actor.
Leto, 44, says he loved Ledger's take on the infamous character.
"Heath did an impeccable, perfect performance as the Joker," the actor told Rolling Stone magazine.
"It's one of the best performances ever in cinema. I had met Heath before. I didn't know him well, but he was a beautiful person."
"I think had it only been portrayed by Heath and it was never a comic book, maybe I would have felt that would be inappropriate. But I thought that given the history, it was OK. The good thing about other people having done this is that you know what direction not to head in.