We observe rotation of the plane of polarization of light in a microcavity parametric oscillator. The angle between the signal and pump polarizations ranges from 60°to 120°and depends strongly on the orientation of the pump polarization. Conversion of linear to circular polarization is detected for certain orientations of the pump polarization and shows a strong correlation with the rotation of the linear polarization. These effects are quantitatively described by a quantum model, which takes into account polariton-polariton scattering, longitudinal-transverse splitting, and self-induced Larmor precession. Evidence for an in-plane field oriented away from the main optical axes is found.