A stable dual-wavelength erbium-doped fiber laser is proposed and experimentally demonstrated. The mode competition in the gain medium was suppressed by enhancing the polarization hole burning mechanism through incorporation of polarization maintaining erbium-doped fiber and nonlinear polarization rotation. The fiber laser displayed high stability with lasing side-mode suppression ratios of 60.69 and 60.57 dB. Additionally, the negligible peak power fluctuation of 0.01 dB was achieved at 1557.17 and 1560.19 nm with both peak powers of 0.23 mW and 3-dB bandwidth of 0.028 and 0.025 nm, respectively. These findings provide insights for an enhanced seed laser source design for remote dual-wavelength fiber laser applications.