Highly selective and low damage etching of the GaAs cap layer on AlGaAs is essential in fabricating GaAs/AlGaAs high electron mobility transistors. The GaAs on AlGaAs was etched using a low energy Cl-2/O-2 neutral beam and the Schottky device characteristics fabricated on the exposed AlGaAs were compared with those fabricated after the etching using wet etching and a Cl-2/O-2 ion beam. Using a low energy Cl-2/O-2 ion beam or a Cl-2/O-2 neutral beam, highly selective etching of the GaAs cap layer to AlGaAs similar to wet etching could be achieved through the formation of Al2O3 on the exposed AlGaAs during the etching. When the electrical characteristics of the Schottky devices were compared, the devices fabricated after the etching using the neutral beam showed the best electrical characteristics such as electrical stability, low leakage current, higher barrier height, etc. by showing low damage to the exposed AlGaAs surface.