A systematic and comprehensive analysis of longitudinal mode-hopping, due to nonlinear gain, and its influence on the design criteria of transverse-mode-controlled semiconductor laser diodes are presented. An existing nonlinear model, which was derived using a density matrix formalism, has been extended in this paper to generate the nonlinear gain coefficient matrix. Properties of the nonlinear gain coefficient matrix, which describes the interaction among cavity modes, are discussed. Using the new nonlinear gain in the steady-state multimode rate equations, conventional Fabry-Perot (FP) and short cavity Fabry-Perot (SFP) semiconductor laser diodes have been numerically simulated. Design issues such as cavity length, cavity volume, facet reflectivity, spontaneous emission factor, mode wavelength, intraband relaxation time, linewidth enhancement factor, and laser structure are also discussed. It is shown that increasing the injection current causes the lasing mode to jump to longer wavelengths. Furthermore, increasing the spontaneous emission factor reduces the dynamic range of laser operation without mode-hopping, and vice versa for short cavity. It has been also shown that the carrier density in the active region shifts to higher values (i.e., experiences a kink) at the onset of mode-hopping. Finally, the total modal gain (linear and nonlinear) competes as the injection current increases. >