The effect brought by the I–V kink effect on large signal performance of AlGaN/GaN high electron mobility transistors (HEMTs) was investigated in this paper. An improved compact model was proposed to accurately characterize the I–V kink effect. The bias dependence of the I–V kink effect has also been taken into consideration. AlGaN/GaN HEMTs with different gate width were utilized to validate the proposed model. Built on the proposed model, the effect brought by the I–V kink effect on large signal performance has been studied. Results show that the I–V kink effect will lead to the degradation of characteristics, including output power, gain, and power-added efficiency at the saturation region. Furthermore, the influence of the I–V kink effect was found to be related with the input power and the static bias point in this work. The time domain waveform and AC dynamic load line were used for validation of results based on simulation. The consequences of this paper will be useful for the optimization of practical circuit design.