Methods for forming a high-quality III-nitride passivation layer on an AlGaN/GaN HEMT. A III-nitride passivation layer is formed on the surface of an AlGaN/GaN HEMT by means of atomic layer epitaxy (ALE), either before or after deposition of a gate metal electrode on the AlGaN barrier layer. Depending on the gate metal and/or the passivation material used, the III-nitride passivation layer can be formed by ALE at temperatures between about 300° C. and about 85020 C. In a specific embodiment, the III-nitride passivation layer can be an AlN layer formed by ALE at about 550° C. after deposition of a Schottky metal gate electrode. The III-nitride passivation layer can be grown so as to conformally cover the entire device, providing a hermetic seal that protects the against environmental conditions.