A new polarization-modulation near-field scanning optical microscope (PM-NSOM) is described and demonstrated. Linearly polarized light is rotated through an angle of 180 degrees at a frequency of 2 kHz with an electro-optic modulator and quarter-wave plate combination and is then coupled into the near-field optical-fiber probe. The sample is positioned in the near field of the probe and the near-field Light coupled through the sample to the far-field is detected. A 2 kHz modulation is observed in the intensity of the light reaching the detector when the probe is positioned over an optically anisotropic region of the sample. The modulated signal is shown to result from anisotropic absorptions in the sample and from polarization-dependent nearfield to far-field coupling. With lock-in detection of the signal, two optical images are recorded simultaneously as (i) the amplitude, which gives a measure of the magnitude of the anisotropy and (ii) its phase, which yields the characteristic direction of the anisotropy. For strongly absorbing dichroic samples the amplitude and phase of the modulated signal give the spatially resolved anisotropic extinction coefficient and transition dipole orientation, respectively. A more complex contrast mechanism is proposed for nonabsorbing samples, involving the effects of bath sample birefringence and anisotropic spatial variations in the refractive index. Nanoscopic characterization of optical materials with the PM-NSOM is demonstrated through resonant imaging of dichroic single crystals of rhodamine 110. Its application to nonabsorbing materials is also demonstrated through nonresonant imaging of the rhodamine crystals, as well as through imaging of defects in fused-quartz cover slips. With PM-NSOM, material defects such as cracks and pits are imaged with high sensitivity, shot-noise-limited signal-to-noise, and better than 100 nm spatial resolution.