An effective interatomic interaction potential for AlN is proposed. The potential consists of two-body and three-body covalent interactions. The two-body potential includes steric repulsions due to atomic sizes, Coulomb interactions resulting from charge transfer between atoms, charge-induced dipole-interactions due to the electronic polarizability of ions, and induced dipole–dipole (van der Waals) interactions. The covalent characters of the Al–N–Al and N–Al–N bonds are described by the three-body potential. The proposed three-body interaction potential is a modification of the Stillinger–Weber form proposed to describe Si. Using the molecular dynamics method, the interaction potential is used to study structural, elastic, and dynamical properties of crystalline and amorphous states of AlN for several densities and temperatures. The structural energy for wurtzite (2H) structure has the lowest energy, followed zinc-blende and rock-salt (RS) structures. The pressure for the structural transformation from wurtzite-to-RS from the common tangent is found to be 24 GPa. For AlN in the wurtzite phase, our computed elastic constants (C11, C12, C13, C33, C44, and C66), melting temperature, vibrational density-of-states, and specific heat agree well with the experiments. Predictions are made for the elastic constant as a function of density for the crystalline and amorphous phase. Structural correlations, such as pair distribution function and neutron and x-ray static structure factors are calculated for the amorphous and liquid state.