Provided is a method of fabricating an IPS mode LCD having improved image quality. After performing a rubbing process on an entire surface of an alignment layer in the IPS mode LCD, polarization and non-polarization irradiations are partially performed on a stepped portion around an electrode using masks. Accordingly, light leakage can be prevented and the contrast ratio can be improved. Also, the high quality of image can be obtained, thereby enhancing the reliability of products. Also, when non-polarized light is irradiated on a rubbed alignment layer, a high quality image can be obtained without any separate polarization apparatus. Consequently, the manufacturing process is simplified and manufacturing costs are reduced.