We study the lateral optical confinement effect on the performance and lasing characteristics of GaN-based vertical-cavity surface-emitting lasers (VCSELs). The anti-guiding and guiding structures are designed by calculating the effective refractive index difference of active and cladding regions. By varying the compensation layer configuration and thickness, the designed effective refractive index of the active region is 0.44% higher than peripheral for the guiding structure. The threshold current density of VCSEL with the guiding structure is 25.4 kA/cm2, which is almost half of that with the anti-guiding structure showing 53.5 kA/cm2. For the anti-guiding structure, the signals from both active and cladding regions are observed by the far-field angle-resolved spectrum at 1.4 × Ith driving current, which agrees well with our simulation. Throughout the study, we show the advantage of the guiding structure both theoretically and experimentally. Moreover, an effective guiding structure is obtained by a proper design and simple device process, which will be very promising for mass production.