The large signal dynamics of passively colliding pulse mode-locked laser diodes is studied. We derive a model which explains modelocking via the interplay of gain and loss dynamics; no bandwidth limiting element is necessary for pulse formation. It is found necessary to have both fast and slow absorber dynamics to achieve mode-locking. Significant chirp is predicted for pulses emitted from long lasers, in agreement with experiment. The pulse width shows a strong dependence on both cavity and saturable absorber length. (C) 1995 American Institute of Physics.