The nonlinear, lossy optical waveguide coupler employing GaAs/GaAlAs multiple quantum well structure has been analyzed. Using properly defined distributed circuit parameters, we model a system of coupled waveguides with a system of coupled transmission lines. The equivalent transmission line system parameters are derived in terms of the rectangular coupled waveguide system parameters. The coupled‐mode theory, developed for the study of the nonlinear lossy transmission line system, is then applied to the equivalent transmission line system. The coupled‐mode equations are solved numerically with the aid of the Runge–Kutta method, and the mode powers are calculated. It is shown that the variation of output power of the coupler and the division of powers between the two guides of the coupler depend strongly on the input power. The minimum input power required for the coupler to switch from the cross‐over state to the straight‐through state depends upon the losses of the guide as well as on the separation between the two guides of the coupler.