Co2+:MgAl2O4 crystals are successfully used as passive Q-switches within the cavity of erbium glass lasers. Their limited resistance to laser radiation might also put constraints on the generated output peak power. Usually, polishing of optical substrates induces a contaminated Beilby layer and damages the subsurface layer, which leads to a considerably lower optical resistance of the obtained surface. Low-energy oxygen plasma etching using different depths of 50, 100, 250 and 400 nm was performed on polished crystals. The surface morphology by atomic force microscopy, transmission spectra, subsurface structure by transmission electron microscopy and the LIDT (R(1)-in-1) using 1540 nm nanosecond pulses were analyzed. It was demonstrated that plasma etching substantially increased the initial crystal surface LIDT. It also allowed the removal of the damaged subsurface layer and almost maintained the initial surface roughness. The presented results demonstrated the good potential of oxygen plasma etching for obtaining highly laser-damage-resistant Co2+:MgAl2O4 crystals for high-power laser applications.