A novel etching process with etchant mist was developed and applied to oxide thin films such as zinc oxide (ZnO), zinc magnesium oxide (ZnMgO), and indium tin oxide (ITO). By using this process, it was shown that precise control of the etching characteristics is possible with a reasonable etching rate, for example, in the range of 10–100 nm/min, and a fine pattern of high accuracy can also be realized, even though this is usually very difficult by conventional wet etching processes, for ZnO and ZnMgO. The mist etching process was found to be similarly and successfully applied to ITO. The mechanism of mist etching has been studied by examining the etching temperature dependence of pattern accuracy, and it was shown that the mechanism was different from that of conventional liquid-phase spray etching. It was ascertained that fine pattern etching was attained using mist droplets completely (or partly) gasified by the heat applied to the substrate. This technique was applied to the fabrication of a ZnO thin-film transistor (TFT) with a ZnO active channel length of 4 µm. The electrical properties of the TFT were found to be excellent with fine uniformity over the entire 4-in. wafer.