The formation of dislocations and stress in GaN layers grown by metalorganic vapor phase epitaxy on sapphire is investigated with regard to the average grain diameter. The grain diameter was determined by monitoring the high-temperature GaN island coalescence process during growth using reflectometry. It is found that the density of edge threading dislocations decreases and the compressive stress measured after cooling to room temperature increases when the coalescence thickness and the grain diameter increase. The data are consistent with models of development of tensile stress due to island coalescence during growth. (C) 2001 American Institute of Physics.