Dislocation effect upon the efficiency of single‐crystal thin‐film AlGaAs‐GaAs heteroface solar cells on Si substrates is analyzed. Solar‐cell properties are calculated based on a simple model; in the model, dislocations act as recombination centers to reduce the minority‐carrier diffusion length in each layer and increase the space‐charge layer recombination current. Numerical analysis is also carried out to optimize thin‐film AlGaAs‐GaAs heteroface solar‐cell structures. The fabrication of thin‐film AlGaAs‐GaAs heteroface solar cells with a practical efficiency larger than 18% on Si substrates appears possible if the dislocation density in the thin‐film GaAs layer is less than 106cm−2.