The formation of PbTe quantum dots (QDs) in a crystalline CdTe host matrix is observed after annealing of a coherent, heteroepitaxial PbTe layer clad between CdTe layers. The two tellurides possess almost identical lattice constants, but differ fundamentally in their lattice structure. The large solid phase miscibility gap leads to phase separation near thermodynamic equilibrium resulting in coherently embedded, centrosymmetric PbTe QDs with almost defect-free {1 0 0 }, {1 1 0} and {1 1 1} interfaces. We compare high resolution transmission electron microscopy (HRTEM) with first-principles total-energy calculations in the repeated-slab approximation. For the two polar (0 0 1) interfaces, significantly different lattice plane spacings are observed, depending on whether the polar CdTe (0 0 1) face is cation-(Cd)- or anion-(Te)-terminated. The most drastic effect occurs at the electrostatically neutral (1 1 0) interface, where we find a lateral spatial offset between the two crystal halves. The agreement between the first-principles calculations and the HRTEM data is excellent for both interface classes. (c) 2006 Elsevier B.V. All rights reserved.