CuAl1/2Fe1/2O2 delafossite was prepared using a solid‐state reaction method to investigate its optical and electronic transport properties. CuAl1/2Fe1/2O2 formed a hexagonal delafossite structure with an Rtrue3false¯m space group. The positive Seebeck coefficient and the direct optical gap of 3.6 eV confirmed that the CuAl1/2Fe1/2O2 delafossite in a p‐type transparent conducting oxide. The fluorescence emission at 390 nm (green emission) confirmed that CuAl1/2Fe1/2O2 has a direct transition band gap. Thermogravimetric analysis indicated a weight loss of 1.2%, caused by the intercalation of O atoms, which produced hole carriers from the different ionic radii at the B sites. The electric conductivity at room temperature was thermally activated, as predicted by the small‐polaron hopping mechanism, with an activation energy of 75 meV and a charge transport energy of 61 meV. CuAl1/2Fe1/2O2 delafossite exhibited p‐type optoelectronic behavior and is a transparent conducting oxide, which may be crucial in the p‐type photonic and electrode industries.