The fabrication of low‐loss photoelastic waveguides in GaAs/AlGaAs layered structures by thin film reactions is investigated. The waveguides are formed by opening a narrow window stripe, a few microns wide, in an otherwise continuous Ni layer under tension deposited on a semiconductor structure. The local tensile stress induced by the Ni layer in the semiconductor causes the local refractive index to increase, thus providing the guiding mechanism. Annealing the sample at 250 °C for 1 h induced an interfacial reaction between the Ni film and the substrate to form Ni3GaAs. The formation of an interfacial compound stabilizes the stresses, making the stress state independent of the deposition system and technique. Single‐mode waveguide propagation losses as low as 1.4 dB/cm at 1.53 μm wavelength have been obtained on annealed waveguides. Further annealing up to 600 °C did not cause degradation in the optical confinement, thus indicating a thermally stable planar waveguide fabricated by this process. Other photoelastic optical devices such as polarizers, splitters, and couplers are also demonstrated.