The carrier density and light output of a pulse modulated GaAlAs diode laser were measured with picosecond time resolution. A new technique for measuring carrier density by transmission of picosecond light pulses through a diode laser is described. The measured carrier density was compared with a density calculated from the light output data using a rate equation analysis. Gain compression of a magnitude expected from relaxation oscillation damping rates was observed. Because the experiment measures the density at the center of the waveguide, and not the average across the active layer, the compression mechanism is not spatial hole burning.