Photoluminescence, carrier lifetime, and laser oscillation in an indium‐doped n‐type Hg1-xCdxTe (x=0.375) layer grown by liquid phase epitaxy on CdZnTe were studied. A single‐line photoluminescence spectrum was observed up to room temperature. The temperature‐dependence of the photoluminescence peak energy and linewidth agrees with a model of band‐to‐band transitions obeying the k‐conservation rule. The carrier lifetime derived from the observed photoluminescence intensity agrees with the observed photodecay lifetime in the temperature range 12–200 K. Laser action was observed in the temperature range 12–90 K at λ=3.6 μm. The laser threshold power increased exponentially with temperature, with a characteristic temperature of 17.5 K. The calculated equivalent threshold current density was found to closely follow the observed one, indicating a maximum threshold gain of 150 cm-1. The calculation shows that at low temperature the threshold power is determined by radiative recombination, while above 50 K Auger recombination becomes dominant. The high value of the threshold gain is attributed to the gain guiding mechanism governing this laser device operation. The observed differential quantum efficiency decreased from 15% at 12 K to 4% at 90 K. A possible mechanism giving rise to this decrease in the efficiency is discussed. The spectrum of the laser with a 3‐μm‐thick active layer exhibited at high pumping power up to three lines, which were attributed to index guided transverse modes. The 9‐μm‐thick active layer device exhibited a quasisingle mode spectrum most probably due to gain guiding in both the lateral and the transversal directions.