An improved way to solve the wave equation for the graded‐index planar waveguide is presented. An analytic solution correct up to the first order of the dielectric function gradient is obtained for a linearly graded medium and is applied to calculate the optical confinement factors in a number of graded‐index waveguides of laser diode structure. For a multilayer sectioning method, the number of section layers required to get a reasonable error is greatly reduced by considering the gradient in each sectioned layer instead of using the average value, especially in the case of linear grading. The advantages and limits of the solution are discussed. ©1995 American Institute of Physics.