Simulation of heteroepitaxial growth with high lattice mismatch is reported. The dynamics of layer growth is treated using the Monte Carlo technique and the energetics aspects related to the effect of strain are accounted for in the VFF approximation. It is shown that the surface becomes rough and 3D islands, showing (111) facets, appear. The strain relaxation is shown to be almost complete after a few atomic layers. Formation of point and extended defects is observed in the deposited layers.