An optimized unsymmetrical squaraine dye 5-carboxy-2[[3-[(2,3-dihydro-1, 1-dimethyl-3-ethyl-1H-benzo[e]indol-2-ylidene)methyl]-2-hydroxy-4-oxo-2-cyclobuten-1-ylidene]methyl]-3,3-dimethyl-1-octyl-3H-indolium (SQ02) with carboxylic acid as anchoring group is synthesized for dye-sensitized solar cells (DSCs). Although the pi-framework of SQ02 is insignificantly extended compared to its antecessor squaraine dye SQ01, photophysical measurements show that the new sensitizer has a much higher overall conversion efficiency eta of 5.40% which is improved by 20% when compared to SQ01. UV-vis spectroscopy, cyclic voltammetry and time dependent density functional theory calculations are accomplished to rationalize the higher conversion efficiency of SQ02. A smaller optical band gap including a higher molar absorption coefficient leads to improved light harvesting of the solar cell and a broadened photocurrent spectrum. Furthermore, all excited state orbitals relevant for the pi-pi* transition in SQ02 are delocalized over the carboxylic acid anchoring group, ensuring a strong electronic coupling to the conduction band of TiO2 and hence a fast electron transfer.