The principle cause of cracks in laser-welded, Au-coated, optoelectronic materials with a phosphorus (P)-containing underlayer is studied experimentally and numerically modeled. Experimental results find that the crack formation is due to the existence of a P-containing underlayer and is not due to the thickness of the Au plating layer. The P-containing underlayer introduced by a electroless plating process may generate a low melting, P-rich segregation layer during solidification. A finite-element method analysis is performed to evaluate the residual stresses variation of the low melting P-rich segregation layer. Results show that the high residual tensile stresses of the P-rich segregation layer are generated by solidification shrinkage. A crack may be initiated by this residual stress. Both experimental observations and numerical calculations indicate that the crack formation mechanism in laser-welded Au-coated optoelectronic materials is directly related to the low melting P-rich segregation layer and its associated high tensile stresses. Based on these results, a Ni underlayer with Pfree electroplating, instead of P-containing electroless plating, should be used prior to plating Au on optoelectronic materials to prevent crack formation in laser welded Au-coated optoelectronic materials.