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This article gives formulas for calculating the diffraction efficiency of gratings with modulation that varies along the direction perpendicular to the grating vector. The analysis uses coupled‐wave theory for mixed (phase and absorption) hologram gratings. General solutions for diffracted (signal) and undiffracted (reference) waves are given. The diffraction efficiency calculated for some special cases is compared with that for a uniform grating. Angle and wavelength mismatch from the Bragg condition is also discussed. © 1995 American Institute of Physics.