Erbium-doped fiber lasers are normally actively mode-locked through amplitude modulation or phase modulation. In this paper, we demonstrate that the laser can also be mode-locked by employing polarization modulation with a polarization-dependent cavity loss. We obtain a nearly transform-limited mode-locked pulse train at 10 GHz repetition rate with timing jitter as low as 164 fs. The timing jitter is only limited by the timing jitter of the driving signal.