We present a study of the optical properties of highly strained CdSe/ZnSe quantum well system. A variety of CdSe/ZnSe samples containing single quantum well or multiple quantum wells grown by molecular beam epitaxy has been studied by using low‐temperature photoluminescence (PL), photoluminescence excitation, and photoreflectance measurements. The strong PL signals associated with excitonic emissions from the samples show that the CdSe/ZnSe heterostructure system is promising in the development of laser diodes and light‐emitting diodes operating in the blue‐green range. Linewidth narrowing of PL spectra with decreasing well width is observed and attributed to alloy formation at the interface due to lateral interdiffusion. The PL signal intensities and the pressure coefficients of interband transitions are also found to depend on the well width, which can be explained in terms of strain relaxation induced misfit dislocations and the critical thickness in the heterostructure system. Our results suggest that the critical thickness for a CdSe layer coherently grown on ZnSe is less than four monolayers.