Propagation-dominant instabilities and chaos were found under so-called good-cavity conditions in an axially pumped solid-state laser operated near the 1/3-degenerate cavity configuration that had not previously been studied numerically. By using the generalized Huygens integral together with rate equations, we obtained a V-shaped configuration that depends on a quasi-periodic threshold. We call the propagation dominant because the laser behaves as a conservative system governed by beam propagation. Although it had previously been predicted that chaos would be impossible under nearly degenerate conditions, we have recognized that the laser is transformed into chaos as a result of the interplay of beam propagation and gain dynamics as the cavity is tuned close to degeneracy.