The formation of the insulating AlOx tunnel barrier is a critical and sensitive process in magnetic tunnel junctions. Both the natural oxidation and the plasma oxidation methods were employed to fabricate the AlOx insulating layer in this study. In the natural oxidation, the Al layer was exposed to pure oxygen gas at 20 Torr for up to 50 min to produce the AlOx tunnel barrier. It was revealed by high resolution transmission electron microscopy that the oxidation occurred preferentially through the grain boundary of Al grains. Also, the AlOx grains expanded isotropically when fully oxidized, thereby making the surface of the AlOx layer modulated. In plasma oxidation, the oxygen plasma was used at 20 mTorr of pure oxygen gas for up to 30 s and the flat AlOx layer formed uniformly on the Al layer. It had sharp interfaces with the underlying metallic Al and the rate of oxide layer growth decreased as the oxidation proceeded.