Fifty years after the invention of the laser diode, and forty years after the butterfly effect signified the unpredictability of deterministic chaos, it is commonly believed that a laser diode behaves like a damped nonlinear oscillator and cannot be driven into chaotic operation without additional forcing or parameter modulation. Here, we counter that belief and report the first example of a free-running laser diode generating chaos. The underlying physics comprises a nonlinear coupling between two elliptically polarized modes in a vertical-cavity surface-emitting laser. We identify chaos in experimental time series and show, theoretically, the bifurcations leading to single- and double-scroll attractors with characteristics similar to Lorenz chaos. The reported polarization chaos resembles noise-driven mode hopping, but shows opposite statistical properties. Our findings open up new research areas for the creation of controllable and integrated sources of optical chaos.