Optical in-well pumped mid-infrared vertical external cavity surface emitting lasers based on PbTe quantum wells embedded in CdTe barriers are realized. In contrast to the usual ternary barrier materials of lead salt lasers such as PbEuTe of PbSrTe, the combination of narrow-gap PbTe with wide-gap CdTe offers an extremely large carrier confinement, preventing charge carrier leakage from the quantum wells. In addition, optical in-well pumping can be achieved with cost effective and readily available near infrared lasers. Free carrier absorption, which is a strong loss mechanism in the mid-infrared, is strongly reduced due to the insulating property of CdTe. Lasing is observed from 85?K to 300?K covering a wavelength range of 3.3?4.2??m. The best laser performance is achieved for quantum well thicknesses of 20?nm. At low temperature, the threshold power is around 100 mWP and the output power more than 700 mWP. The significance of various charge carrier loss mechanisms are analyzed by modeling the device performance. Although Auger losses are quite low in IV?VI semiconductors, an Auger coefficient of CA ?=?3.5?×?10?27 cm6 s?1 was estimated for the laser structure, which is attributed to the large conduction band offset.