We develop a fully vectorial and non-paraxial formalism to describe spontaneous parametric down-conversion in nonlinear thin films. The formalism is capable of treating slabs with a sub-wavelength thickness, describe the associated Fabry–Pérot effects, and even treat absorptive nonlinear materials. With this formalism, we perform an in-depth study of the dynamics of entangled photon-pair generation in nonlinear thin films, to provide a needed theoretical understanding for such systems that have recently attracted much experimental attention as sources of photon pairs. As an important example, we study the far-field radiation properties of photon pairs generated from a high-refractive-index nonlinear thin-film with zinc-blende structure that is deposited on a linear low-refractive-index substrate. In particular, we study the thickness-dependent effect of Fabry–Pérot interferences on the far-field radiation pattern of the photon pairs. We also pay special attention to study of entanglement generation, and find the conditions under which maximally polarization-entangled photon pairs can be generated and detected in such nonlinear thin-films.