The strain relaxation and dislocation densities of a compositionally step‐graded InGaAs/GaAs buffer layer have been investigated. The structural results were correlated with the electrical properties of an In0.3Ga0.7As/In0.29Al0.71As modulation doped heterostructure grown on top. The buffer was a three step InxGa1−xAs structure each layer 300 nm thick and each In composition step x=0.1. X‐ray rocking curve analysis measured a tilt about an in‐plane <110≳ axis of about 0.3° per step. At the top interface of the buffer the density of misfit dislocations evaluated by electron microscopy was comparable to the number required to account for this tilt. Thus, the 60° burgers vectors for the majority of dislocations along one in‐plane line direction was restricted to a maximum of two rather than the usual four possibilities. The electron mobility in the two‐dimensional electron gas channel showed a small assymetry (4%) in the two in‐plane <110≳ directions and was highest in the direction parallel to the tilt axis...