We evaluate the performance potential of a diode pumped Nd: YAG rod laser by finding the absorbed pump distribution using ASAP, pump induced thermal lensing, gain medium surface distortion and stresses using FEMLAB and depolarization losses using MATLAB. Beam propagation in the optically distorted Nd:YAG rod and the free space part of the cavity, and the output laser beam were determined with a computational scheme we developed which employs the beam propagation method combined with sparse matrix technology. We propose a special cavity design that can select the spatial eigen mode shape of the laser and simultaneously compensate for pump induced thermal lensing, gain medium surface distortion and birefringence. The converged solutions calculated this special cavity design give both high extraction efficiency and good output beam quality. Sensitivity of the output beam to mirror tilt, thermal induced mirror distortion, and errors in the cavity length or the optical distortions in the rod were also calculated.© (2006) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.