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We demonstrate 850-nm oxide-confined vertical-cavity surface-emitting lasers (VCSELs) with a locally etched subwavelength surface grating that are single-mode and polarization stable from threshold up to thermal roll-over, reaching ∼4 mW of output power. The side-mode suppression ratio (SMSR) is >30 dB and the orthogonal polarization suppression ratio (OPSR) is ∼20 dB. Moreover, no distortion of the far-field beam profile is observed as a result of the surface grating. Our numerical calculations show that a carefully designed VCSEL can have a high simultaneous mode and polarization selectivity without a significant increase in loss for the favored fundamental mode with polarization state perpendicular to the grating lines. This indicates characteristics such as threshold current and resonance frequency will not be notably degraded. The calculations also show a low sensitivity to variations in grating etch depth and duty cycle, which relaxes fabrication tolerances. In our experimental parametric study, where the oxide aperture diameter, surface grating diameter, and grating duty cycle were varied, the combined mode and polarization selection was investigated. For an optimum combination of oxide aperture and surface grating diameters of 4.5 and 2.5 μm, respectively, the device is found to be single-mode and polarization stable for a broad range of grating duty cycles, from 55% to 75%, with only a small variation in other laser performances, which is in line with theory.