A coaxial transmitter optical subassembly (TOSA) with optical isolator alignment correction may be used in an optical transceiver for transmitting an optical signal at a channel wavelength. The coaxial TOSA includes an optical fiber coupling receptacle extending from a laser package. The laser package may include a laser diode and a lens to focus laser light emitted from the laser diode onto an optical fiber. The laser diode and lens are aligned along a first longitudinal axis of the laser package parallel to a transmission path of the laser light. An optical isolator located in the transmission path is aligned along a second longitudinal axis of the laser package. The second longitudinal axis is coincident with a centerline of the laser package, and the first longitudinal axis is offset from the second longitudinal axis by a predetermined offset distance to compensate for light shifting characteristics of the isolator.