We fabricated and evaluated GaN/AlGaN multi‐quantum wells (MQWs) and ultraviolet laser diodes (UV LDs) on high and low dislocation density underlying layers by epitaxial lateral overgrowth (ELO) method. We analyzed the internal quantum efficiency (IQE) versus carrier concentration characteristics quantitatively by excitation intensity dependent photoluminescence method. The IQE of the MQWs on the ELO AlGaN is 75% when the carrier density is 1x1019 cm‐3. We demonstrated the UV LD on the ELO AlGaN. However, the UV LD on flat AlGaN did not operate. Also, we investigated the internal loss (αi) and the IQE multiplied the injection efficiency by changing the reflectivity of the facets. The results showed that the internal loss is 6 cm‐1, and the IQE multiplied by the injection efficiency is 18% (© 2011 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)