The purpose of this work is to study the effect of carrier dynamics on quantum-dot laser performance and to clarify how the carrier relaxation lifetime and the bi-exciton effect manifest themselves in the quantum-dot laser operation. We derive carrier-photon rate equations for quantum-dot lasers and simulate the output power vs. injected current relationship and the small-signal modulation response. We clarify criteria on the carrier relaxation lifetime as well as the inhomogeneous broadening linewidth, the dot density and the crystal quality to achieve high-performance. Then, we develop an optical gain formula for the bi-exciton- exciton transition and modify rate equations to describe bi- exciton lasing in quantum dots. We show spontaneous emission and lasing properties of bi-excitons, and discuss the effect of carrier relaxation lifetime and oscillator strength on the laser operations.© (1998) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.