We present experimental measurements and a corresponding theoretical analysis of a novel NOLM device made using a symmetrical (50/50) coupler, highly twisted fiber, and a quarter-wave (QW) retarder plate in the loop. The physical mechanism for the nonlinear properties is the polarization rotation of the counter-propagating optical fields. We also experimentally demonstrate that the nonlinear polarization rotation analysis is correct by controlling the transmission behavior as the QW retarder plate is rotated. We propose a simple description of the NOLM behavior, showing that nonlinear switching is obtained through the polarization asymmetry generated by the QW retarder plate. The proposed NOLM design is very attractive for applications like pedestal suppression and amplitude regularization of optical signals, since it operates stably without day-to-day drifting. We experimentally demonstrate the efficiency of the NOLM for high-order amplitude regularization of an optical pulse train subject to amplitude modulation, as an overall suppression of about 20 dB of the modulation was obtained over all frequencies. An environmentally stable NOLM will enable a wide range of applications, such as, optical switching and demultiplexing, all-optical active and passive mode-locking, and pedestal suppression.