Modulated operation of the recently described method of laser diode intracavity absorption spectrometry is discussed. A simple driver circuit which can be used for cw or modulated operation of laser diodes is described. Development of a modulated near infrared laser diode intracavity spectrophotometer for absorption measurements is also provided. This modulated operation mode was compared to cw mode as to sensitivity, noise, ease of operation and detection limit. This modulated driver was implemented using an inexpensive 3 mW 750 nm laser diode and an IR3C02A driver circuit. Advantages of modulated laser diodes in spectroscopic applications are also presented.