In this paper, a compact diode‐pumped continuous wave (CW) and passively Q‐switched mode‐locked (QML) Tm:YAG lasers operation on the 3F4–3H6 transition is realized by using tantalum aluminum carbide (Ta4AlC3) phase ceramic (MAX) material as a saturable absorber (SA). The first stable QML operation of the mid‐infrared Tm:YAG laser at 2012.38 nm is demonstrated with a Ta4AlC3‐SA. A stable QML Tm:YAG laser was achieved when the absorption pumping power reached 14 W. Under QML mode, Tm:YAG laser generated a maximum average output power of 560 mW at 2012.38 nm with an optical‐to‐optical conversion efficiency of 4%, corresponding to a shortest pulse duration of 541 ps and a high repetition rate of 168 MHz. The experiment shows that Ta4AlC3‐SA is an attractive candidate for diode‐pumped CW and QML mid‐infrared all‐solid‐state lasers emitting around 2.0 μm.