We report the observation of an anomalously large electro-optic modulation effect in potassium titanyl phosphate (KTiOPO4) waveguides fabricated under various conditions. An interferometric method was used to measure the effective electro-optic coefficient in the waveguides by measuring the phase retardation of an optical mode when a voltage was applied across the substrate. We observed that at low modulation frequency the effective electro-optic coefficient in the waveguides can be higher than the bulk value by a factor up to about 100. A space charge model relating the mobile charge, space charge field, and observed enhancement in the electro-optic modulation is proposed to explain the mechanism of this effect. Calculation for dc steady state, small signal analysis, and large signal simulation is compared to the experimental observation. Possible device application and long term effects on system operation are also discussed.