The high-quality surface of an optical element is a prerequisite for a high-power laser system design. Yttrium aluminum garnet (YAG) crystal is one of the most important materials for solid-state laser active medium. Laser-induced damage threshold (LIDT) of the YAG crystals might substantially limit the maximum output power of the whole laser system. In this research, we show the novel possibility of significant LIDT enhancement via plasma etching of YAG crystal surface for picosecond laser pulse durations. The dependence of the LIDT on the etching depth was investigated. With the optimized etching conditions, the LIDT value was increased by more than three times and reached the intrinsic LIDT of the bulk crystal.