The derivation of the wave equation that governs ion cyclotron range of frequencies (ICRF) wave propagation, absorption, and mode conversion within the kinetic layer in tokamaks has been extended to include diffraction and focusing effects associated with the finite transverse dimensions of the incident wave fronts. The kinetic layer considered consists of a uniform density, uniform temperature slab model in which the equilibrium magnetic field is oriented in thezˆ direction and varies linearly in thexˆ direction. An equivalent dielectric tensor, as well as a two‐dimensional energy conservation equation, are derived from the linearized Vlasov–Maxwell system of equations. A generalized, but approximate form of the mode conversion‐tunneling equation is then extracted from the Maxwell equations, using the parabolic approximation method in which transverse variations of the wave fields are assumed to be weak in comparison to the variations in the primary direction of propagation. Numerical solutions of this approximate wave equation agree well with solutions to the exact wave equation within the kinetic layer.