Rare earth-activated aluminum nitride powders are made using a solution-based approach to form a mixed hydroxide of aluminum and a rare earth metal, the mixed hydroxide is then converted into an ammonium metal fluoride, preferably a rare earth-substituted ammonium aluminum hexafluoride ((NH4)3Al1-xRExF6), and finally the rare earth-activated aluminum nitride is formed by ammonolysis of the ammonium metal fluoride at a high temperature. The use of a fluoride precursor in this process avoids sources of oxygen during the final ammonolysis step which is a major source of defects in the powder synthesis of nitrides. Also, because the aluminum nitride is formed from a mixed hydroxide co-precipitate, the distribution of the dopants in the powder is substantially homogeneous in each particle.