In this paper, analytical and simulation results for the bit error rate (BER) performance and fading penalty of a coherent optical binary polarization shift keying (2PolSK) heterodyne system adopted for a free space optical (FSO) communication link modeled as the log-normal and the negative exponential atmospheric turbulence channels are presented. The conditional and unconditional BER expressions are derived, demonstrating the comprehensive similarity between the 2PolSK and the binary frequency shift keying (2FSK) schemes with regards to the system sensitivity. The power penalty due to the non-ideal polarization beam splitter (PBS) is also analyzed. The receiver sensitivity employing 2PolSK is compared with other modulation schemes in the presence of turbulence and the phase noise. The results show that 2PolSK offers improved signal-to-noise ratio (SNR) performance compared to the binary amplitude shift keying (2ASK).