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We report on analytical, numerical, and experimental studies of the thermally induced optical distortions in transversally diode-pumped Nd:YAG composite laser rods. The calculated distributions of temperature, optical path difference, and stress are compared for two different laser rods, a homogeneously doped rod and a composite rod with a hexagonal Nd:YAG core in an undoped YAG rod. Our theoretical investigations of the optical path difference are experimentally confirmed by using a Mach-Zehnder interferometer. It is found that the optical path difference profile of the composite rod has stronger gradients than those of the homogeneously doped rod. In conjunction with experimental evidence, the paper illustrates that, for pump powers below 200 W the amount of birefringence is comparable for both laser rods.