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.