A method of magneto-optically modulating light comprises the steps of linearly polarizing the light on its transmission path, and placing a magneto-optic effect element on the transmission path of the polarized light with the spontaneous magnetization direction of the magneto-optic effect element being substantially parallel with the transmission path. The plane of polarization of the polarized light is rotated about the transmission path in the absence of the magnetic field applied to the magneto-optic effect element having the polarized light pass therethrough. The method further comprises the step of applying the magnetic field to the magneto-optic effect element with its internal magnetization being oriented in a direction perpendicular to the transmission path. The plane of polarization of the polarized light is maintained in its initial state in the presence of the magnetic field applied to the magneto-optic effect element having the polarized light pass therethrough. When the object approaches the magneto-optic effect element, the applied magnetic field is modulated to have the direction of the internal magnetization of the magneto-optic effect element varied. As a result, the plane of polarization of the polarized light is rotated about the transmission path from its initial state when the polarized light passes through the magneto-optic effect element. According to the method, the light can be modulated by way of the object inoperable to apply the magnetic field to the magneto-optic effect element but capable of modulating the magnetic field of the magneto-optic effect element.