The thriving of Internet‐of‐Things and integrated wireless sensor networks has brought an unprecedented demand for sustainable micro‐Watt‐scale power supplies. Development of high‐performing micro‐thermoelectric generator (μ‐TEG) that can convert waste thermal energy into electricity and provide sustainable micro‐Watt‐scale power is therefore extremely timely and important. Herein, a significant advance in the development of earth‐abundant, nontoxic thermoelectric materials of aluminum‐doped zinc oxide (AZO) is presented. Through nanostructure engineering using a novel in situ O2 plasma treatment, AZO films are demonstrated with ultralow thermal conductivity of 0.16 W m−1 K−1 which is the lowest reported in the literature. This nanostructured film yields a power factor of 294 μW m−1 K−2 at 563 K and has resulted in a state‐of‐the‐art ZT of 0.11 at room temperature and 0.72 at 563 K for AZO thin films. Furthermore, the fabrication and testing of a prototype lateral μ‐TEG are reported based on the AZO thin film which achieves a power output of 1.08 nW with an applied temperature difference of 16.9 °C.