The etching characteristics of AlxGa1-xN grown by metal-organic chemical-vapor deposition were investigated in an inductively coupled plasma (ICP) reactive ion etching system using Cl-2/Ar gas mixtures. Etch rate variations with substrate bias voltage, ICP coil power, chamber pressure, Cl-2/Ar gas mixture ratios, and gas flow rates were investigated. The optimum chamber pressure for etching was found to be dependent on both the substrate bias voltage and ICP coil power. Anger electron spectroscopy analysis showed that: the stoichiometries of the etched Al0.22Ga0.78N surfaces were identical, independent of the etching conditions. Etching results were successfully applied to form highly anisotropic and smooth facets in GaN/InGaN/AlGaN heterostructure laser materials.