The etching characteristics of indium zinc oxide (IZO) in $Cl_2/Ar$ plasma were investigated, including the etch rate and selectivity of IZO. The IZO etch rate showed non-monotonic behavior with increasing $Cl_2$ fraction in the $Cl_2/Ar$ plasma, and with increasing source power, bias power, and process pressure. In the $Cl_2/Ar$ (75:25%) gas mixture, a maximum IZO etch rate of 87.6 nm/min and etch selectivity of 1.09 for IZO to $SiO_2$ were obtained. Owing to the relatively low volatility of the by-products formation, ion bombardment was required, in addition to physical sputtering, to obtain high IZO etch rates. The chemical state of the etched surfaces was investigated with X-ray photoelectron spectroscopy. These data suggested that the IZO etch mechanism was ion-enhanced chemical etching.