Single crystalline CdTe nanowires have been synthesized using Au-catalyzed chemical vapor deposition. X-ray diffraction reveals the existence of non- negligible inhomogeneous compressive strain in the nanowires along the < 111 > growth direction. The effect of the strain on the electronic structure is manifested by the blue-shifted and broadened photoluminescence spectra involving shallow donor/acceptor states. Such residual strain is of great importance for a better understanding of the optical and electrical behaviors of various semiconductor nanomaterials as well as for device design and applications.