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In-situ characterization of the surface nature and re-crystallization of c-axis YBa2Cu3O7-δ (YBCO) films engineered by Ar ion etching and subsequent annealing has been carried out. Effects of kinetic energy of the Ar ions and annealing conditions have been examined. RHEED and XPS measurements showed that etching with the ion energy above a few hundred eV for longer than 60 sec yielded insulating and amorphous surface layers. Analysis of XPS core signals revealed a deviation of surface composition toward a Y-rich one with an increase of the product of [ion flux] × [ion energy] × [etching time], whereas thickness and degree of reduction of the amorphous layer were dominated by the kinetic energy of the Ar ions: the higher ion energy resulted in a thicker and less reduced layer. For the amorphous layer created by the 500 eV-beam etching, oxidation-annealing at 630°C for 1h is sufficient to convert it into a metallic 123 structure. For the surfaces treated by the 1 keV etching, an insulating feature was conserved even after the annealing of 710°C, 1 h or 660°C, 3 h. These results mean that the higher energy etching and the shorter subsequent process are desired to properly fabricate barrier layers for the interface-engineered sandwich type of junctions.