This article reports for the first time on the lateral growth of PEO (plasma electrolytic oxidation) films on Al1050 alloy by the application of anodic pulse current in an alkaline electrolyte. Generation of microarcs was observed at the edges initially and then moved towards the central region with PEO treatment time. Disc type PEO film islands with about 20 µm diameter were formed first and they grew laterally by the formation of new disc type PEO films at the edge of pre-formed PEO islands. The PEO film islands were found to be interconnected completely and form a continuous PEO film when generation of small size microarcs are terminated at the central part of the specimen, resulting in very smooth surface with low surface roughness less than 1 µm of R a . Further PEO treatment after the complete interconnection of PEO films islands showed local thickening of PEO films by vertical growth. It is concluded that very smooth PEO film surface can be obtained by lateral growth mechanism rather than vertical growth of them.