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Modulation of second‐harmonic generation in tellurium by a 5.3‐μm signal beam is analyzed. The signal beam in combination with the other beams in the process (10.6 μm doubling to 5.3 μm) generates free carriers by two‐photon absorption. The resultant free carriers decrease the refractive index and increase the loss tangent of the material, thereby interfering with the second‐harmonic generation process. The process is examined here both theoretically and experimentally. It is shown that the modulation efficiency can be as great as 100%. The prospect of achieving a usable power gain in a simple crystal of tellurium is shown to be unlikely, but the analysis points to promising alternatives.