We present the in-depth investigation of solution-processed bulk-heterojunction solar cells based on the merocyanine dye MD304 as a donor in combination with the soluble fullerene derivative [6,6]-phenyl-C61-butyric acid methyl ester (PCBM) as acceptor. The optimized MD304:PCBM devices exhibit an external quantum efficiency of ca. 50%, and a power conversion efficiency of up to 2.1% under standard illumination and 2.7% under reduced illumination intensities. Because of the strongly dipolar character of merocyanine dyes the bulk material features a relatively large dielectric constant, which is beneficial for charge transport and reduced carrier recombination. This somewhat compensates the limited hole mobility of the dipolar merocyanine.