Highly efficient ridge waveguide pseudomorphic single quantum well lasers, emitting at 980 nm, have been fabricated from an In0.2Ga0.8As/GaAs/AlGaAs graded‐index separate confinement heterostructure grown by molecular beam epitaxy. The lateral index guiding provided by the ridge reduces the anomalously large lateral loss of optical power found in gain‐guided structures, thereby reducing the internal loss by more than 50%. The low threshold current (7.6 mA) and high differential quantum efficiency (79%) obtained under continuous operation as well as the transparency of the GaAs substrate to the emitted radiation render these lasers attractive for GaAs‐based optoelectronic integration.