Polarization bistability between the transverse electric (TE) and transverse magnetic (TM) modes is observed in an external cavity semiconductor laser. Hysteresis in the polarization‐resolved output power is obtained by controlling the optical feedback power of the TE mode via an intracavity electro‐optic modulator. Transitions between single external‐cavity frequencies of TE and TM modes are also demonstrated. Nonlinear gain saturation is the origin of this bistability.