Efficiency limiting mechanisms in CdTe/CdS solar cells were investigated. It was found that growth of CdTe films under tellurium rich conditions enhanced the interdiffusion between CdTe and CdS and reduced the CdTe bandgap to 1.47 eV, whereas, growth of CdTe films under Cd‐rich conditions retained the CdTe bandgap at 1.5 eV. A CdCl2 treatment followed by a 400 °C post‐growth annealing of CdTe improved the cell performance significantly. However, it also produced defects at E v +0.64 and E v +0.17 eV possibly due to chlorine related complexes. An inverse correlation was found between the density of these defects and V oc. Rapid thermal processing (RTP) was investigated as a variation of the conventional furnace anneal post‐growth treatment. Preliminary RTP results look promising with cell efficiency in excess of 8% without any CdCl2 treatment. Further improvements are expected by optimizing the CdCl2 treatment and the RTP conditions.