Abstract: In order to improve the performance of the operation of optical isolator at high power laser conditions, thermally induced depolarization effect in optical isolator was investigated with the use of Jones theory. An optical isolator system with external compensation crystal was proposed in this paper. Further the rules of the changes of both isolation degree and thermal lens effects with the increasing of input optical power were also analyzed. The results show that thermally induced depolarization and thermal lens in magneto-optic crystal can be effectively suppressed by regulating the crystal axis direction and changing length of CaF2. Compared with traditional isolator, the isolation degree is increased by 16.3 dB and the power loss is reduced by 8% when the incident laser power is 100 W. Through the analysis result of this paper, the isolator structure can be optimized to both improve the isolation degree and reduce the power loss at high power laser conditions.