In-plane anisotropic two-dimensional (2D) materials have gained considerable interest in the field of research, due to having the potential of being used in different device applications. Recently, among these 2D materials, group 10 transition metal dichalcogenides (TMDs) pentagonal Palladium diselenide (PdSe2) is utilized in various sections of researches like nanoelectronics, thermoelectric, spintronics, optoelectronics, and ultrafast photonics, owing to its high air stability and broad absorption spectrum properties. In this paper, it is demonstrated that by utilizing this novel 2D layered PdSe2 material as a saturable absorber (SA) in an EDF laser system, it is possible to obtain switchable laser pulse generation modes. At first, the Q-switching operation mode is attained at a threshold pump power of 56.8 mW at 1564 nm, where the modulation range of pulse duration and repetition rate is 18.5 μs–2.0 μs and 16.4 kHz–57.0 kHz, respectively. Afterward, the laser pulse generation mode is switched to the mode-locked state at a pump power of 63.1 mW (threshold value) by changing the polarization condition inside the laser cavity, and this phenomenon persists until the maximum pump power of 230.4 mW. For this mode-locking operation, the achieved pulse duration is 766 fs, corresponding to the central wavelength and 3 dB bandwidth of 1566 nm and 4.16 nm, respectively. Finally, it is illustrated that PdSe2 exhibits a modulation depth of 7.01%, which substantiates the high nonlinearity of the material. To the best of the authors’ knowledge, this is the first time of switchable modes for laser pulse generation are achieved by using this PdSe2 SA. Therefore, this work will encourage the research community to carry out further studies with this PdSe2 material in the future.