The blanket system is one of the most important components in a fusion reactor because it has a major impact on both the economics and safety of fusion energy. Based on the requirement that an electrically insulating coating on the inner wall of cooling tubing must minimize the magnetohydrodynamic pressure drop that occurs during the flow of liquid metal in a magnetic field, aluminum nitride (AlN) is considered a candidate coating material for the lithium self-cooled blanket concept. Detailed investigations were conducted on the fabrication, metallurgical microstructure, compatibility with liquid Li, and electrical characteristics of AlN as a coating material. Lithium compatibility studies were conducted in static systems by exposure of AlN-coated specimens for several time periods, at various temperatures, and in various lithium chemistries. Electrical resistance of the specimens was measured at room temperature before and after exposure to liquid Li. The paper discusses the results from ongoing activities on the development of AlN coatings.