In this paper, a modified penalty finite element method (FEM) for solving the nonlinear singularly perturbed bi‐wave problem with a rectangular Morley element is presented. The second order term, the nonlinear term, and the source term are approximated by the bilinear interpolation part (conforming part) instead of the whole function on each element, respectively. The well‐posedness of the approximation solution is proved through Brouwer fixed point theorem. Quasi‐uniform optimal error estimate in the energy norm is derived independent of the negative powers of the real perturbation parameter δ appearing in the considered problem, which improves the corresponding result in the existing literature. Finally, some numerical results are given to verify the theoretical analysis.