In this article, we report investigations on the effects of methane/hydrogen (CH4/H2) reactive ion etching (RIE) of InGaAs/InAlAs/InP heterostructure materials for high electron mobility transistors, and especially on the electrical properties of the InAlAs layer after dry recess etching of the InGaAs cap layer. The ion etching induced damages in the barrier layer InAlAs are evaluated by diode current–voltage and capacitance–voltage measurements and deep‐level transient spectroscopy (DLTS). TheI–Vdata indicate that RIE lowers the Schottky barrier height (φb) and increases the ideality factor. Using low pressure (10 mTorr) RIE processes, with various self‐bias voltages, shows that the use of low ion energy is necessary to get good Schottky contacts. Rapid thermal annealing at 400 °C is shown to induce a limited decrease of the dry etching induced defects. However, full recovery of the electrical properties is not achieved. A significant improvement of the Schottky diode electrical characteristics and DLTS spectra is observed after wet etching a 60 Å thick InAlAs layer before metal deposition, indicating that the main damages are concentrated within a short distance from the surface.