In this work, a field plated recessed gate III‐nitride HEMT on β‐Ga2O3 substrate is proposed using AlN spacer between AlGaN and GaN layers. The two‐dimensional electron gas (2DEG) transport characteristics, input/output, and RF characteristics of the proposed HEMT with AlN spacer layer of different thickness (1, 2, 3, 4, and 5 nm) are numerically simulated and compared with HEMT without spacer layer. The 2DEG, which is created at the junction of AlGaN/GaN, plays a crucial role in the operation of GaN HEMTs. With the help of AlN as spacer layer between AlGaN and GaN, an augmented 2DEG concentration is accomplished owing to its large conduction band offset, high polarization effect, and higher barrier. Additionally, the inclusion of AlN spacer layer shifts the 2DEG density away from interface, resulting minimized interface scattering which results into greater mobility. The HEMT exhibited a mobility of 1261 cm2/Vs, threshold voltage of −0.45 V, drain current of 1.12 A/mm, breakdown voltage of 149 V, and excellent RF characteristics, that is, cut‐off frequency (maximum oscillation frequency) of 384 GHz (546 GHz) using 2‐nm AlN spacer layer. The proposed III‐nitride HEMT on β‐Ga2O3 substrate with 2‐nm AlN spacer can be used for RF/microwave and high‐power nanoelectronics applications.