Objective: The aim of this study was to develop a microcontroller based surgical diode laser system and to test it at two different modes (continuous [CW] and modulated) in vitro on lamb liver tissue. Background Data: In laser surgery, depending on the properties of laser source (wavelength, power, application time, and mode of operation), the effects observed on the tissue may change from carbonization to hyperthermia. The aim is to remove the target tissue without giving any thermal damage to the surrounding tissue. Carbonization should be avoided, thus controlling the mode of operation is very crucial. Methods: The system consisted of a microcontroller based control unit, 980-nm high-power diode laser source, and fiber delivery unit. This system has the capability of delivering different modes of laser energy to the target tissue ranging from CW to 20-Hz modulated beams. The surgical diode laser system was tested on liver tissue in vitro. Efficiency of laser-tissue interaction was quantified in terms of thermal alteration per unit energy and corresponding carbonization level. Results: Modulated mode resulted in larger coagulated area with minimum carbonizations. Carbonized area/thermally altered area (CarbA/TAA) ratio for CW mode of operation at 16 J is 0.35; however, this ratio was found to be 0.05 at modulated mode, when even 10 times higher energy (160 J) was delivered to the target tissue. Conclusion: Results emphasized the significance of mode of operation as well as the other laser parameters. Modulated mode was found to be a promising regime for safer laser surgery.