A nonlinear directional coupling element consisting of a GaAs‐based multiple quantum well (MQW) heterostructure sandwiched between two slab optical waveguides is analyzed numerically with optical absorption losses in the MQW included. Optical waveguides are designed to be made of lossless AlGaAs slabs of an appropriate composition corresponding to the wavelength of operation. Calculations indicate an improvement in the element’s overall propagation attenuation by about two orders of magnitude when compared to previous results dealing directly with MQW optical waveguides. Promising element performance characteristics are reported.