Plastic deformation of polyethylene in uniaxial and biaxial loading conditions is studied using molecular dynamics simulation. Effects of tensile strain rates from 1 × 105 to 1 × 109 s−1, and mass density in the range of 0.923–0.926 g/cm3 on mechanical behaviour and microstructure evolution are examined. Two biaxial tensile deformation modes are considered. One is through simultaneous stretching in both the x and y directions and the other sequential stretching, firstly in the x-direction and then in the y-direction while strain in the x-direction remains constant. Tangent modulus and yield stress that are determined using the stress–strain curves from the molecular dynamics simulation show a strong dependence on the deformation mode, strain rate and mass density, and all are in good agreement with results from the experimental testing, including fracture behaviour which is ductile at a low strain rate but brittle at a high strain rate. Furthermore, the study suggests that the stress–strain curves under uniaxial tension and simultaneous biaxial tension at a relatively low strain rate contain four distinguishable regions, for elastic, yield, strain softening and strain hardening, respectively, whereas under sequential biaxial tension, stress increases monotonically with the increase of strain, without noticeable yielding, strain softening or strain hardening behaviour. The molecular dynamics simulation also suggests that an increase in the strain rate enhances the possibility of cavitation. Under simultaneous biaxial tension, with the strain rate increasing from 1 × 106 to 1 × 109 s−1, the molecular dynamics simulation shows that polyethylene failure changes from a local to a global phenomenon, accompanied by a decrease of the void size and increase of uniformity in the void distribution. Under sequential biaxial tension, on the other hand, the density of the cavities is clearly reduced.