An illuminated balloon assembly. The assembly includes a balloon having a front wall and a transparent rear wall or a rear wall including a transparent area. A projector is mounted on an exterior surface of the rear wall. The projector has a housing with an outlet proximate to the transparent area of the rear wall and a light source directing light toward the housing outlet. A light filter element is positioned within the housing such that light is selectively filtered to cause a display image to project on the balloon front wall. The housing has upper and lower shells, with the upper shell rigidly attached to the rear wall and supporting the light source. The lower shell is pivotally mounted on the upper shell. The filter is a two piece construction with portions provided on the upper and lower shells to cause the display to animated by projector movement.