AbstractNiobium carbide (Nb2C), a newly developed 2D MXene material, has attracted much attention due to its outstanding electronic and optical properties. In this work, few‐layer 2D Nb2C nanosheets are synthesized by magnetron sputtering deposition method. Z‐scan measurements with pump source operating at 1.0 µm are performed to study the third‐order nonlinear optical response, revealing excellent light modulation capabilities of 2D Nb2C. The effective nonlinear absorption coefficient (βeff ≈ –105 cm GW–1) caused by saturable absorption effect is determined to be two orders of magnitude larger than that induced by reverse saturable absorption processes (two‐photon absorption, etc.). The positive nonlinear refractive index n2 is determined to be ≈10–13 m2 W–1 for the first time. Moreover, by decorating 2D Nb2C onto microfiber, microfiber‐based 2D Nb2C saturable absorber is fabricated and applied for compact square‐wave pulse mode‐locking ytterbium‐fiber laser. The pulse duration of SWP increases from 0.652 to 1.616 ns with the pulse energy increasing linearly up to 0.89 nJ while the peak power remains a constant. The results not only verify the capability of 2D Nb2C as an optical modulator, but also pave a new way for exploring SWP laser sources.