A theoretical model is developed to study the optical transition and optical gain of PbTe/CdTe quantum dots. The model is based on the k·p envelope function approach, and anisotropic band structure characteristics of PbTe are taken into consideration. The relationships of optical gain of PbTe/CdTe quantum dots vs dot size and injection carrier density are given. The theoretical results suggest that PbTe/CdTe quantum dots with dot size of 15—20nm are promising materials for mid-infrared lasers, which may produce optical gain higher than 5000cm-1 when the injection carrier density ranges (0.3—3)×1018cm-3. The optical gain decreases with dot size increasing. However, higher injection carrier density is required for PbTe/CdTe quantum dots with smaller sizes (<15nm). Therefore the optimal PbTe quantum dot sizes are 15—20nm.