I have installed 3" gimbal lights that fit into the tread/riser space of the stair. With today's wafer LED lights clearance is no issue.

You could also do a surface-mount light on the ceiling -- I've used some quite slim ones in situations like this. However, current slim cans ("LED retrofit" type) can be used in very little ceiling depth, so that's likely to be your best bet -- you could use one at the top of the stairs and another over the midpoint. Third option would be very flat sconces sunk into the new wall at a couple of points.

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3onthetree - thanks. Could you attach a picture? My husband is concerned that some of the steps will be highlighted and others will be dark. From your description are the lights under the treads attach to the middle of the risers? Or are they on the side of the wall showing on the steps?

I appreciate the feedback from everyone. I will have to meet with the electrician to see what can be done. All of you have definitely given me some things to think about. I'll post back with the final outcome, but since we are doing a lot of the work ourselves it may take a while.

"I have installed 3" gimbal lights that fit into the tread/riser space of the stair."

IMO it isn't worth the effort to do this, a light would have to be installed on the underside of each tread, the light on each step would be uneven, and most of the light would be focused beneath the staircase.

What is above the ceiling in the stairs? Do you have an attic up there that is accessible?

What led me to this was I was tired of knocking the wall sconce with stuff going up and down to the basement.

I used a 3" adjustable gimbal GU10 fixture - it's supported by the drywall (remodel fixture) so no mounting to the back of riser or under the tread. I did need strapping under the stringers to allow for electrical to pass under instead of through (can't remember if I needed the extra 3/4" for can clearance). They are placed 32" apart and give uniform lighting on the steps. So I did wire them first prior to drywall to experiment with spacing and if the 3" spot throw could offer general light (a 4" can wouldn't fit).

This was before the recent wafer LED lights, you can get those as well and in 3" or 4", but you need to have adjustable gimbal so you don't stare into the light while walking down the stairs.

How many lumens did you use for each? And how far from floor or ceiling on the side wall? Or did these end up on the ceiling of the stairway? I think this is the direction we might go if the electrical works out. Thanks so much for your help.

Nancy, There is a pantry on the main floor that backs up against the stairway ceiling. There “may” be some room to come down from the rafters through the garage into that area. The garage is to the left as you go down the stairwell. This option may be a more expensive endeavor. We are going to need help checking out that option with the electrician.

We have a simple wall light at the top of the stairs. It operates from the top of the stairs or from the bottom. Size would be determined by placement. Ours is something like this.

How many lumens did you use for each? And how far from floor or ceiling on the side wall? Or did these end up on the ceiling of the stairway?

It was a standard stair to basement with a stair above it to 2nd floor, so probably the min 6'8" clear height or so above treads. The lights are within the ceiling inside the pocket made by the riser/tread above it. Lumens are pretty much dictated by the lamp (bulb) style and size, so with 3" they are about 500 lumen (the incandescent equivalent of 40-50watts). A stair only 36" wide doesn't need much more lumens if you have multiple fixtures and depending if they are spots like 3".

Thanks. That helps a bunch.