We report on the implementation of dynamic body-bias technique to improve the performance of AlGaN/GaN high electron mobility transistors (HEMTs) with the successful integration of body-diode. In this configuration, p-GaN body-diode-based back-gate control is used to shift the threshold voltage and dynamically modulate the ON/OFF characteristics of a normally-ON AlGaN/GaN HEMT. A fourth back-gate terminal is connected to the p-GaN layer to control the depletion width of the body-diode, which in turn modulates the 2-D electron gas (2DEG) density. A positive/negative shift in the threshold voltage is measured by increasing/decreasing the depletion width below the channel. A positive back-gate bias application in the ON-state is shown to increase the 2DEG current density resulting in higher ON-current. The application of a negative back-gate bias is shown to be effective in the positive shift of the threshold voltage, in reducing the 2DEG channel current and in increasing the OFF-state break-down voltage. We have experimentally demonstrated enhanced effect of body-diode-based back-gate control in shifting the threshold voltage of a normally-ON HEMT toward normally-OFF mode. The optimum back-gate voltage range which can be applied during both ON and OFF states has been experimentally determined.