It is based on the principle that the capacitance of varactor diode can be varied with modulating voltage. The varactor diode is placed across the tank circuit. RF choke (L) blocks RF signal but allows modulating signal to pass through. The modulating signal is applied in series with DC bias voltage. The low frequency signal passes through RF choke and applied across varactor diode. The varactor diode changes its capacitance according to modulating signal. Hence total capacitance value in the tank circuit changes and hence oscillator frequency changes. The output is hence a FM wave. Varactor diode modulator is used in automatic frequency control and in remote tuning.