Two-dimensional simulations were performed to optimize the waveguiding region’s aluminum composition of an AlGaN/GaN separate confinement heterostructure (SCH) laser with large band discontinuities. Results demonstrate that the active region’s thickness, waveguiding regions’ thickness, and the material composition of the waveguiding region should be optimized, based on losses of the materials in the structure. Results also demonstrate that the threshold current of a SCH laser may be larger than that of a double heterostructure laser. The increase is caused by a competition between the active region and the waveguiding region which has a parasitic effect on the laser’s modal gain because of the waveguiding region’s slightly larger band gap, so that below the lasing threshold, photon emission and population inversion can occur in both regions. At the minimum threshold current the structure is optimized to strongly confine both the guided optical mode and the charge carriers responsible for the gain. ©1997 American Institute of Physics.