Ultrafast gain dynamics in GaAlAs diode amplifiers have been studied using 100 fs optical pulses. Pulse propagation through the amplifier resulted in temporal broadening and pulse shaping due to both gain saturation and material dispersion. Pump‐probe experiments indicate the presence of two processes contributing to the gain dynamics but give no evidence of spectral hole burning. A dynamic carrier heating model is presented to explain all of the observed gain nonlinearities, and the implications of our results on the dynamic response of laser diodes are discussed.