The thermal-induced birefringence is a key factor limiting the output power of a laser system in fundamental mode. Birefringence compensation is mandatory for high power lasers with good beam quality. The principle of birefringence compensation by use of two Nd∶YAG rods is investigated. Considering the thickness of a quartz polarization rotator, a revised model is presented by use of proper cavity structure and components with a 4f imaging spatial filter for birefringence compensation. The depolarization ratio less than 2.5% is achieved experimentally. By means of matrix optics, a cavity containing a two-rod system is equivalent to a thin lens, which allows one to analyze the system properties such as stability of the resonator and beam radius in the cavity. A positive lens is inserted into the cavity to enlarge the fundamental mode volume, 61W linearly polarized output is obtained in a lamp continuous wave (CW)-pumped Nd∶YAG laser. It is shown that the birefringence compensation is essential for a dynamic stable resonator with a lage fundamental mode volume.