It is theoretically shown how a two-photon laserlike oscillator with strongly squeezed output can be constructed. The physical mechanism leading to squeezed laserlike oscillator is the strong competition among the nonlinear gain due to resonant four-wave mixing process, nonlinear losses due to the absorption of generated photons, and linear losses from the cavity. In the balanced case, the photon correlations result in a linewidth that is narrower than the Schawlow-Townes limit. © 1989 The American Physical Society.