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The authors present a theoretical analysis and experimental demonstration of optically self-activated polarization switching process in a 90° twist alignment dye-doped nematic liquid crystal. The underlying mechanisms are laser induced dye-assisted director axis reorientation and order parameter modifications. Experimental observations are in good agreement with the theoretical expectations derived from a modified Jones matrix calculation, and demonstrate the feasibility of designing efficient low threshold polarization and fast switching and optical limiting devices for cw and microsecond lasers.