A small-molecule donor material of 2,4-bis[4-(N,N-diisobutylamino)-2,6-dihydroxyphenyl] squaraine (SQ) was used to fabricate the solution-processed solar cells with fullerene. The thermal annealing process and the solvent additive method were systematically investigated to illuminate their effects on the performance of solar cells. The optimized device exhibited a power conversion efficiency (PCE) of 3.31% under 1 sun, AM 1.5G simulated solar irradiation with thermal annealing at 50 degrees C and a small amount of 1,8-diiodooctane (DIO) additive with a volume ratio of 0.4%. A reduced surface roughness and improved charge carrier mobility were ascribed to the enhancement of PCE in DIO incorporated devices. The simulation using a theoretical model of charge transfer state based on Onsager-Braun theory was carried out, and the results revealed that thermal annealing and solvent additive could facilitate charge transfer dissociation, increase charge carrier generation, and thereby improve the performance of solar cells based on SQ: fullerene bulk heterojunction. (C) 2012 Elsevier B.V. All rights reserved.