A variable optical attenuator (VOA) based on polymer stabilized twisted nematic (PSTN) liquid crystal (LC) is demonstrated. Comparing with the normal twisted nematic LC-based VOA, PSTN exhibits a much faster response time. Moreover, the polymer networks effectively eliminate the backflow effect which exists in the normal TNLC cell. The attenuation mechanism of the PSTN LC was studied. Both polarization rotation and light scattering effects are found to contribute to the optical attenuation. The ratio between these two mechanisms can be adjusted by changing the polymer concentration and polymer network domain size.