AbstractUntil now, the rectangular coordinate system has been used mainly for the analysis of optical beam propagation. Hence, when a tilted waveguide is analyzed, the core shape is expressed by a stepped approximation which causes the quantization error so that the error accumulates as the field propagates.In this paper, with a view to overcome this problem, the finite‐difference beam‐propagation method is proposed in which the oblique coordinate system is employed. To confirm the effectiveness of the method, the propagation error of the fundamental mode is evaluated by the model mismatch loss in a tilted step index slab waveguide. It is found that the mode mismatch loss is kept low as the quantization error in the rectangular coordinate system is now eliminated. Further, as an example of application of this method, an optical waveguide bend is analyzed and the effects of coherent coupling are investigated. It is pointed out that the computational region can be made narrower in this method compared with that required in the rectangular coordinate system.