Photoluminescence spectra, carrier lifetime, and laser action of Hg1−xCdxTe (x=0.5) layers grown by liquid‐phase epitaxy on a CdZnTe substrate were studied as a function of temperature. The minority‐carrier lifetime was measured from the recovery of the luminescence signal following pulsed photoexcitation. Photoluminescence spectra of the annealed sample exhibited two lines, 15 meV apart, whereas in an as‐grown film one broad line was observed. The transition mechanisms determining the temperature variation of the peak energy and the linewidth are discussed. The luminescence intensity increased rapidly from 300 to 50 K, but leveled off at low temperatures suggesting carrier freezeout in accord with resistivity measurements. Lasing was observed from a cleaved stripe of the wafer using photopumping with a pulsed GaAs laser. The nominal threshold power density increased from 37 W/cm2 &mgr;m at 12 K to 380 W/cm2 &mgr;m at 130 K, in agreement with threshold calculations. Far‐field pattern widths perpendicular and parallel to the film plane of 3.2° and 2.8°, respectively, were measured. Lateral guiding in this device is discussed. The laser wavelength decreased slowly with the photopumping power, suggesting gain pinning.