The well-known thermo-elastic effect of laser irradiation can be exploited to generate strong localized stresses when an expanded, long-pulse, low-intensity laser beam is used to irradiate the specimen. These stresses will produce a parametric modulation of the received ultrasonic signals, which is somewhat similar to the acousto-elastic effect often used in nonlinear ultrasonic studies. Otherwise hidden small cracks in fatigue-damaged aluminum and titanium specimens can be readily detected by exploiting this optically induced thermoelastic modulation during ultrasonic surface wave inspection since they are susceptible to crack-closure and therefore exhibit strong parametric modulation. The temporal and spatial variations of the ultrasonic signals due to laser irradiation were studied experimentally. Based on these results, the direct temperature modulation of the ultrasonic velocity can be separated from the thermo-elastic stress modulation present only in cracked specimens. It has been found that this method can be used to selectively increase the sensitivity of ultrasonic flaw detection to small fatigue cracks by more than one order of magnitude.