The authors studied a GaAs/Al0.3Ga0.7As hetero-nanostructure etching process, neutral beam (NB) etching with chlorine (Cl2) and argon (Ar) mix gas. The effect of different mixing ratios of chlorine and argon has been investigated. The results showed that when pure chlorine NB (Cl-NB) was used, the pillar formation problem was observed on the etched surface. By increasing the Ar/(Cl2+Ar) gas mixing ratio, the pillar can be eliminated and the roughness of etched surface smoothed. As an Ar/(Cl2+Ar) gas mixing ratio of 78% was used, the root-mean-square roughness of etched surfaces of both GaAs and Al0.3Ga0.7As is about 0.6 nm, which is almost the same as those of as-received samples. Meanwhile, the etching selectivity of GaAs/Al0.3Ga0.7As can be kept close to 1, which would help to etch a clear and smooth profile. Additionally, the high-resolution transmission-electron microscopy image of the GaAs etch profile shows that no crystalline defect was observed on the etched surface.