The optical losses of homojunction and heterojunction ``close-confinement'' GaAs injection lasers fabricated by liquid phase epitaxy have been described in terms of a simple waveguide model. By introducing an (AlGa) As–GaAs p+-p heterojunction (ΔEg∼0.1 eV) within ∼2 μ of the p-n junction, the room-temperature absorption loss is substantially reduced and the laser efficiency increased. This reduced absorption is due to combination of improved optical waveguiding and reduced absorption in the p+ material adjoining the active region. In addition, the laser gain coefficient can be increased in some cases by the addition of a heterojunction with the degree of improvement depending on the electron diffusion length, width, and doping level of the active region. The increased gain coefficient can contribute substantially to the reduced threshold current density of ``close-confinement'' lasers at room temperature. However, the relative contributions of reduced laser loss and increased gain coefficient to the improved performance depends critically on the details of the laser construction, and no generally valid conclusions can be made applicable to all heterojunction lasers. Values of the exterior differential quantum efficiency of 43% are obtained at 300°K, which means that much of the light internally generated is emitted. Because of the reduced internal loss, the spontaneous exterior efficiency is also greatly increased (a factor of 2–3). State-of-the art values of the threshold current density for the optimum structures are 10 000 A/cm2 for a cavity length of 20 mils, with values of 8000 A/cm2 in exceptional units. A power conversion efficiency at 300°K of 10% has been measured, which agrees with the theoretically predicted value. It is noteworthy that the diode series resistance is comparable in the solution-grown lasers with and without the heterojunction. The laser behavior has been studied as a function of varying acceptor concentration, donor concentration and bandgap energy discontinuity at the p+-p interface. Semiquantitative agreement for the laser loss between theory and experiment at 300° and 77°K is obtained for an active region width of ∼2 μ, using reasonable values of the index-of-refraction differences between the various laser regions and free-carrier absorption.