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Single-ordinary, single-extraordinary, and random polarization optical waveguides fabricated on Z-cut lithium niobate substrates by varying nickel diffusion time and temperature are presented. A relationship of the refractive index changes versus concentration for the nickel diffused waveguides is obtained. Moreover, a single-extraordinarily polarized Mach-Zehnder interferometer was fabricated for electrooptical characterization. The measured half-wave voltage is as low as 4.3 V and the extinction ratio is greater than 25 dB.