Exceptional points (EPs) in non-Hermitian systems have recently attracted considerable attention owing to unique state-flipping and peculiar phase accumulation features. The dynamical encirclement of an EP and corresponding time-asymmetric mode evolution properties due to the breakdown in the adiabatic theorem have been a key to a range of exotic physical effects in various open atomic, molecular, and optical systems. Here, exploiting a new gain-loss-assisted dual-mode optical waveguide that hosts a dynamical EP-encirclement scheme, we have explored the enhanced nonreciprocal effect in the dynamics of light with the onset of saturable nonlinearity in the optical medium. We propose a prototype waveguide-based isolation scheme with the judicious tuning of nonlinearity level where one can pass only a chosen mode in any of the desired directions as per device requirement. The deliberate presence of EP enormously enhances the nonreciprocal transmission contrast even up to 40 dB over the proposed device length with a scope of further scalability. This exclusive topologically robust, mode-selective all-optical isolation scheme will certainly offer opportunities in integrated photonic circuits for efficient coupling operation from external sources and improve device performances. © 2020 American Chemical Society.