The analysis of volume diffraction gratings is important to the optimization of broad classes of devices, including acoustooptic Bragg cells, volume holograms, and spatial light modulators. A number of these devices involve gratings that exhibit striking polarization properties, which if used advantageously can offer significant opportunities for extended performance. Although the standard formalism for analyzing volume grating diffraction is the coupled wave approach, the optical beam propagation method has proven to be a powerful alternative formulation. For example, Thylen and Yevick recently utilized this method to study the coupling of polarized waveguide modes. In this paper, the optical beam propagation formalism of Thylen and Yevick for anisotropic media is further extended to the analysis of polarization effects in volume phase gratings. This method is both extremely intuitive (all intermediate mathematical steps have immediate physical significance) and also superior in cost of computation measures (execution time, computer memory required) for intricate modulation structures. Several broad classes of birefringent phase grating diffraction problems are identified, and sample solutions using the optical beam propagation method are exhibited. The cost of computation of the optical beam propagation method is shown to scale gracefully with increasing modulation complexity.