Just as it is a Mitzvah to light candles in honor of Shabbat, it is also a Mitzvah to light candles in honor of the holidays since the Torah calls them “proclamations of holiness.” Similarly, the Rambam (Chapter 6 of Hilchot Yom Tov) writes that “just as there is a Mitzvah to honor the Shabbat and make it enjoyable, there is a Mitzvah to do so to the other festivals as well, as the verse states, ‘To proclaim Hashem’s sanctified [day], ‘honored’,’ and the verse refers to the holidays as ‘proclamations of holiness’ as well.” We can infer from his words that there is a Mitzvah to light candles in honor of Yom Tov just as there is a Mitzvah to light candles in honor of Shabbat.
Included in this Mitzvah of lighting candles in honor of Shabbat and Yom Tov is any other additional lighting in the house, such as electric lights and the like, and this is also considered like “candles for Shabbat and Yom Tov.”
Since there is a Mitzvah to light candles in honor of Yom Tov, one must recite a blessing upon lighting the Yom Tov candles, just as one recites a blessing upon lighting Shabbat candles. The text of the blessing is as follows: “Baruch Ata Hashem Elokeinu Melech Ha’Olam Asher Kideshanu Be’Mitzvotav Ve’tzivanu Le’Hadlik Ner Shel Yom Tov.”
Nevertheless, there are several Yemenite Jews who customarily do not recite a blessing upon lighting Yom Tov candles, their reason being that they follow the rulings of the great Rambam on all Halachic matters (this is because the Rambam was very active in strengthening the Jewish community in Yemen during the Diaspora, so much so that the Ramban writes that that the Yemenite Jews would add into the text of their Kaddish, “In our lifetime and in our days and in the lifetime of our great rabbi and leader, Rabbi Moshe ben Maimon”) and the Rambam makes no mention in his works regarding the Mitzvah of lighting Yom Tov candles, thus, it must be that there is no such Mitzvah according to the Rambam. However, based on what we have explained above that the Rambam equates the Mitzvot of honoring and enjoying Yom Tov to the Mitzvah of honoring and enjoying Shabbat, thus, just as it is clear that lighting Shabbat candles is included in the honor and enjoyment of Shabbat so that people do not have to sit in the dark, if so, the same would apply regarding the lighting of Yom Tov candles, and it can very well be considered a complete Mitzvah as per the enactment of our Sages which requires a blessing like any other Mitzvah.
The reason why the Rambam omits the Mitzvah of Yom Tov candles from his work is because the Rambam usually does not quote laws that are not derived explicitly from the Talmud; rather, he usually just alludes to such laws, as we find in many places. This rule in the works of the Rambam is quoted by many great Poskim.
Thus, Yemenite Jews must, without a doubt, recite a blessing upon lighting Yom Tov candles just as they recite a blessing upon lighting Shabbat candles, as is the custom of all other Jewish communities; especially once they merit immigrating to Israel. This is indeed the ruling of the majority of the great Yemenite Rabbis, among them Hagaon Harav Yosef Tzuberi zt”l, as well as others.
Summary: The Mitzvah of lighting Yom Tov candles is equivalent to the Mitzvah of lighting Shabbat candles. Similarly, regarding the blessing, the correct custom is to recite a blessing upon lighting Yom Tov candles. Even members of various communities who have customarily not recited a blessing on lighting Yom Tov candles when residing outside of Israel, upon arriving in Israel they should amend their custom and begin to recite this blessing.