The optical nonlinearity of a mode‐locking dye (Kodak 9740) under picosecond excitation at 532 nm, is studied using the Z‐scan technique. Theoretical fits to the data give a value of 3.2 cm/GW for the two‐photon absorption coefficient (&bgr;) and −2.1×10−5cm2/GW for the real part (&ggr;) of the nonlinearity. In addition, we demonstrate optical limiting using two‐photon absorption as well as self‐defocusing. ©1995 American Institute of Physics.