By pre-milling in glucose aqueous solution, γ-Al2O3 particles were uniformly mixed with carbon via hydrothermal treatment technique. Then, directly heating the γ-Al2O3/C precursor at 50 °C/min to 1775 °C for 15–30 min in N2, single phase AlON powder was fast obtained through one-step carbothermal reduction and nitridation (CRN). By approaching the evolution of phase assemblages and morphology during heating and dwelling, the one-step fast CRN mechanism for preparing fine AlON powder was revealed. The carbon around γ-Al2O3 particles delayed the phase transformation of Al2O3 from γ phase to α one. The undesired particle aggregation and growth before formation of AlON was also auxiliarily inhibited by swiftly achieving AlON formation temperature via high heating speed. Further elevating synthesis temperature enabled high reaction kinetics to boost the speed of AlON formation. By these ways, CRN reactions were quickly completed to fast obtain pure AlON powder with small primary particles due to limited particle aggregation and growth. The as-prepared fine AlON powder was easy to be ball-milled to prepare highly transparent AlON ceramics by pressureless sintering.