Laser and water-jet manufacturing processes are independently used to cut monolithic and composite ceramics. While these processes offer many advantages over diamond sawing and other abrasive processes, the energy efficiency, precision, cutting speed, and environmental threats remain as barriers to their continued success. This is partly attributed to the material removal mechanisms, which are melting, and subsequent evaporation (laser) and energy-intensive erosive wear (water jet). In this paper, we describe a novel laser and water-jet (LWJ) hybrid manufacturing process that enables the synergistic effects of laser and pressurized pure water jet, facilitating precise material removal by thermal shock-induced fracture and overcoming the deficiencies listed above. Experiments of the LWJ effects on the cutting of aluminum nitride, an electronic ceramic substrate, are presented. The most exciting results are very narrow kerf dictated by the crack width; the absence of thermally affected zone, slag formation, chemical decomposition; and controlled thermal cracking, implying that the LWJ process is far superior to conventional laser cutting of ceramics. The LWJ process also improved the surface finish while reducing energy losses in the process. The practical realization of the LWJ manufacturing process could be a potential alternative to diamond saw, high-power laser, and high-pressure abrasive water-jet methods for machining hard and brittle ceramics.