A new type of circular dichroism (CD) spectrometer has been designed and constructed based on a principle which is entirely different from that of commercial CD spectrometers. The Mueller matrix approach is used to analyze and evaluate important factors determining its performance, which is revealed to be dependent upon (1) the quality of a depolarizer, (2) the residual static birefringence inherent in a collimator lens, a photoelastic modulator, and an analyzer. Furthermore, the polarization characteristics of both a monochromator and a detector are found to have no effect on CD signal in the new CD spectrometer. Thus, a double‐grating monochromator can be used instead of a double‐prism monochromator. The total performance of the new CD spectrometer is ascertained to be equivalent to that of commercial CD instruments. With using a lock‐in amplifier tuned to 100 kHz, the new CD spectrometer can be easily converted into a linear dichroism spectrometer.