The combined effect of the misfit strain and the strain caused by a neighboring defect on the activation energy of nucleation of dislocation loops is calculated. Defects of different sizes and shapes and located at different distances from the loop are considered. At very low mismatches (<0.5%) and with very small defects, the activation energy is not sufficiently reduced and large layer thicknesses are required for nucleation. At mismatches of 1% or more, and with defect sizes of 1.5 nm or larger, heterogeneous nucleation at growth temperatures becomes possible. These defects are more efficient in reducing the energy when they are at the center of the loop. Though impurities located within the core of the dislocations can reduce the core parameter substantially and therefore reduce the activation energy, in practice this is unlikely to occur. Very large defects such as SiO2and SiC precipitates reduce the activation energy of nucleation over large distances thereby inducing the nucleation of several loops which results in very rapid relaxation of strain. In highly mismatched layers (4%–8%) homogeneous nucleation occurs at about 400–500 °C. Why the periodic arrangement of misfit dislocations is observed only in the highly mismatched layers is explained. ©1995 American Institute of Physics.