We investigated the etching characteristics of aluminum-doped zinc oxide (AZO) thin films in an adaptively coupled plasma (ACP) system. The dry etching characteristics of AZO films were studied by changing the Cl2/Ar gas mixing ratio, RF power, DC bias voltage. We determined the following optimized process conditions: RF power of 500 W, DC bias voltage of −100 V, process pressure of 15 mTorr. In Cl2/Ar plasma (=50:50%), the maximum etching rate of AZO films is 70.45 nm min−1. The ion composition of Cl2/Ar plasma was determined by optical emission spectrometry (OES). The chemical reactions on the surface of AZO films were analyzed by x-ray photoelectron spectroscopy (XPS).