We have theoretically analyzed and experimentally observed the effects of wavelength dependent birefringence inside a laser cavity on the output characteristics of fiber lasers with a figure eight geometry. The spectral and polarization characteristics of fiber lasers are found to be very susceptible to the resultant birefringence composed of the intrinsically existing wavelength dependent birefringence and the externally induced birefringences inside the fiber. For the variation of twist-induced birefringence inside the nonlinear amplifying loop mirror, the laser output power and center wave-length of continuous wave lasers change periodically, but the polarization characteristics remains nearly unchanged. The changes of the birefringence inside the linear loop has little effect on the spectral characteristics but changes the polarization properties such as the polarization direction.