The traditional “evaporation∕melt and blow” mechanism of CO2 laser cutting of aluminum nitride (AlN) chip carriers and heat sinks suffers from energy losses due to its high thermal conductivity, formation of dross, decomposition to aluminum, and uncontrolled thermal cracking. In order to overcome these limitations, a thermochemical method that uses a defocused laser beam to melt a thin layer of AlN surface in oxygen environment was utilized. Subsequent solidification of the melt layer generated shrinkage and thermal gradient stresses that, in turn, created a crack along the middle path of laser beam and caused material separation through unstable crack propagation. The benefits associated with thermal stress fracture method over the traditional method are improved cut quality, higher cutting speed, and lower energy losses.