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The effects of both strain and quantum confinement on the differential gain of strained InGaAsP/InP quantum well lasers (QWLs) are studied on the basis of valence‐band structures calculated by k∙p theory. Using an InGaAsP quaternary compound as an active layer makes it possible to separate the effect of strain (both tensile and compressive) from the quantum‐confinement effect. In tensile‐strained quantum wells, both strain and quantum‐confinement effects exert a significant influence not only on the valence‐band density of states (DOS) but also on the valence‐subband energy spacings. In compressive‐strained wells, on the other hand, the strain and quantum‐confinement effects play an independent role in determining the DOS and the subband energy spacings, respectively. On the basis of these characteristic features of the valence‐band structure of strained quantum wells, we discuss basic design principles for strained QWLs with larger differential gain.