Transmission electron microscopy and photoluminescence studies were performed to determine the critical thickness for generation of misfit dislocations in Sil-xGex layers grown by low pressure chemical vapor deposition. Above a certain Ge content the transition from two dimensional to three-dimensional growth occurs before generation of misfit dislocations. For instance, for x ∼0.3 and a substrate temperature around 700°C island formation was observed to start at 1.8 nm. The formation of islands is attributed to the preferential growth of SiGe in areas with less lattice strain. Islands were observed to broaden the exciton photoluminescence of the quantum well structures.