Red‐green up‐conversion and optical storage are measured in CdS crystals containing deep impurities such as P, N, Fe, and others. The presence of cadmium vacancies favors the formation of centers of self‐activated luminescence which reduce the up‐conversion efficiency considerably. Spatial fluctuations of the conduction‐ and valence‐band energies with respect to the Fermi level causes electrons and holes to separate after excitation and to populate distant islands in the crystal. The temperature limit of the up‐conversion and storage is determined by the energy barrier between the electron and hole islands.