A new AlGaN/AlN/GaN high electron mobility transistor (HEMT) structure using a Compositionally step-graded AlGaN barrier layer is grown on sapphire by metalorganic chemical vapour deposition (MOCVD). The structure demonstrates significant enhancement of two-dimensional electron gas (2DEG) mobility and smooth surface morphology compared with the conventional HEMT structure with high Al composition AlGaN barrier. The high 2DEG mobility of 1806 cm2 /Vs at room temperature and low rms surface roughness of 0.220 nm for a scan area of 5/umx5/um are attributed to the improvement of interfacial and crystal quality by employing the step-graded barrier to accommodate the large lattice mismatch stress. The 2DEG sheet density is independent of the measurement temperature, showing the excellent 2DEG confinement of the step-graded structure. A low average sheet resistance of 314.5 ft/square, with a good resistance uniformity of 0.68%, is also obtained across the 50mm epilayer wafer. HEMT devices are successfully fabricated using this material structure, which exhibits a maximum extrinsic transconductance of 218 mS/ mm and a maximum drain current density of 800m A/mm.