The large signal dynamics of passively colliding pulse mode‐locked laser diodes is studied. We derive a model which explains modelocking via the interplay of gain and loss dynamics; no bandwidth limiting element is necessary for pulse formation. It is found necessary to have both fast and slow absorber dynamics to achieve mode‐locking. Significant chirp is predicted for pulses emitted from long lasers, in agreement with experiment. The pulse width shows a strong dependence on both cavity and saturable absorber length. ©1995 American Institute of Physics.