AbstractThe ongoing challenge in advancing organic light‐emitting diodes (OLEDs) is to mitigate performance degradation during operation, caused by the dissociation of molecular components and the ensuing defect formation. While defects can emerge throughout OLEDs with diverse detrimental effects, prior research has predominantly focused on those within the emission layer (EML), leaving other device areas unexplored. In this work, a previously overlooked, yet profound impact of defects in the hole transport layer (HTL) on charge and exciton dynamics in a phosphorescent OLED (PHOLED) is investigated. HTL defects confine and impede the injection of free holes into the EML, requiring an increased supply of electrons to maintain constant current in the device. Consequently, excitons become concentrated at the HTL/EML interface, leading to enhanced bimolecular annihilations and an 8% reduction in device efficiency. Furthermore, when HTL defects are within 8 nm from the interface, they can directly quench excitons, resulting in a substantial decrease in device efficiency by up to 76%. This defect‐induced exciton quenching occurs through both Dexter and Förster energy transfer, each with distinct distance dependence. The findings emphasize the necessity of preventing defect formation, particularly in proximity to the HTL/EML interface, to minimize efficiency degradation for PHOLEDs.