New experimental and theoretical results on TE/TM bistability in 1.3 &mgr;m ridge‐waveguide InGaAsP/InP bulk lasers at room temperature are presented. Measured polarization resolved light power–current (P–I) characteristics as well as lateral near‐ and far‐field patterns are compared with results from a theoretical model based on the paraxial wave equations for TE‐ and TM‐polarized modes and the diffusion equation for the carrier distribution. The model was numerically evaluated by use of the beam propagation method. The observed TE/TM bistability is explained by the interplay of three different effects: (i) Tensile stress of about 109dyn/cm2promotes the TM gain strongly enough to compete with the TE mode. (ii) Improved TM waveguiding due to an enhancement of the effective refractive index near the beam axis caused by carrier depletion with increasing current leads to the onset of TM lasing and TE/TM switching. (iii) The TE/TM transition is accompanied by an abrupt increase of spatial hole burning in the lateral carrier distribution. Because of this nonlinear effect, a lower current is needed to switch the laser back to TE, giving rise to a hysteresis loop in theP–Icharacteristics and to TE/TM polarization bistability. ©1995 American Institute of Physics.