We demonstrate the third harmonic generation of a 1542-nm laser using a dual-pitch periodically poled lithium niobate waveguide with a conversion efficiency of 66%/W2. The generated 514-nm light is used for saturation spectroscopy of molecular iodine and laser frequency stabilization. The achieved laser frequency stability is 1.1×10-12 at an average time of 1 s, which is approximately one order of magnitude better than the acetylene-stabilized laser at 1542 nm. Uncertainty evaluation and absolute frequency measurement are also performed. The developed frequency-stabilized laser can be used as a reliable frequency reference at the telecom wavelength for various applications including optical frequency combs and precision interferometric measurement.