In this paper, AlNO nano-films have been deposited on an AlGaN/GaN heterojunction by alternating growth of AlN and Al₂O₃ using plasma enhanced atomic layer deposition (PEALD). With optimized AlN layer insertion in Al₂O₃, the oxygen is effectively blocked from diffusing to the AlGaN surface and the formation of detrimental Ga–O bonds is significantly suppressed. Owing to the negative fixed charges in Al₂O₃, provided by the incorporated nitrogen, the flat band voltage (V_fb) of the AlNO/AlGaN/GaN metal–insulator–semiconductor (MIS) diode exhibits a positive shift of 1.50 V, compared with the Al₂O₃/AlGaN/GaN MIS diode. Markedly reduced hysteresis and frequency-dispersion in the C–V characteristics have also been observed at the AlNO/AlGaN interface. Furthermore, the interface states density (N_it) at the AlNO/AlGaN interface has been reduced by one order of magnitude compared with the N_it at the Al₂O₃/AlGaN interface, and the border traps density (N_bt) near the AlNO/AlGaN interface is also identified to be reduced by the insertion of AlN layers into Al₂O₃. The PEALD induced optimization of AlNO deposition on the AlGaN/GaN heterojunction provides a pathway to the fabrication of AlGaN/GaN high electron mobility transistors (HEMTs) with low interface trap density.