We investigate loss mechanisms in 1.55-m In-GaAsP-InP multiquantum-well ridge-waveguide laser diodes at room temperature. The common method of measuring light versus current curves and plotting the inverse slope efficiency versus laser length is employed to extract the internal optical loss i and the differential internal efficiency i. This method neglects the dependence of both the parameters on the laser cavity length L. We analyze physical mechanisms behind these loss parameters and their length dependence using the commercial laser simulation software PICS3D. Internal optical losses are dominated by carrier density dependent absorption. The differential internal efficiency above threshold is found to be mainly restricted by carrier recombination losses within the quantum wells, i.e., Fermi level pinning is not observed. Both loss mechanisms are enhanced with shorter cavity length due to the higher quantum well carrier density. For the shortest device measured (L = 269 m), we extract i = 20 cm 01 and i = 66%. With increasing cavity length, the loss parameters approach i = 15 cm 01 and i = 70%. From the inverse slope efficiency versus cavity length plot, we obtain i = 14 cm 01 and i = 67% independent of laser length.