The superior physical and electrical properties of aluminum oxynitride (AlON) gate dielectrics on AlGaN/GaN substrates in terms of thermal stability, reliability, and interface quality were demonstrated by direct AlON deposition and subsequent annealing. Nitrogen incorporation into alumina was proven to be beneficial both for suppressing intermixing at the insulator/AlGaN interface and reducing the number of electrical defects in Al2O3 films. Consequently, we achieved high-quality AlON/AlGaN/GaN metal–oxide–semiconductor capacitors with improved stability against charge injection and a reduced interface state density as low as 1.2 × 1011 cm−2 eV−1. The impact of nitrogen incorporation into the insulator will be discussed on the basis of experimental findings.