An effective mesa-isolation process using Cl-based gas chemistry and oxygen plasma post-treatment is investigated to minimize the effect of plasma-induced damage on AlGaN/GaN high-electron mobility transistor (HEMT) performance. Plasma-induced dc bias of the dry etching of AlGaN/GaN heterostructures is optimized using Cl2/BCl3/Ar gases by monitoring leakage current between adjacent mesas and etch profiles near mesa edges. A dc bias of ∼100 V leads to a smoother etched surface and mesa surface near mesa edge and a lower leakage current than dc bias of 260 V. AlGaN/GaN HEMTs fabricated under a dc bias of 100 V show a reasonable pinch-off performance but still high drain leakage current level (tens of microamperes). Oxygen plasma treatment after dry etching is introduced for further reduction in the leakage current. In situ oxygen plasma treatment more effectively improves the leakage current/breakdown performance than ex situ oxygen plasma treatment after the HEMTs are exposed to air. Combination of low-bias Cl-based dry etching and in situ plasma treatment leads to a breakdown voltage higher than 90 V and a drain leakage current of a few nanoamperes at (VDS,VGS)=(5 V,<VT). It is suggested that in situ oxygen treatment, together with low-bias dry etching, passivates the plasma-induced surface damage and results in good pinch-off/breakdown characteristics in AlGaN/GaN HEMTs.