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Ultra-wide bandgap (UWBG) Al0.65Ga0.35N channel high electron mobility transistors (HEMTs) were deposited using a close-coupled showerhead metal-organic chemical vapor deposition reactor on AlN-on-sapphire templates to investigate the effect of transport properties of the two-dimensional electron gas (2DEG) on the epitaxial structure design. The impact of various scattering phenomena on AlGaN channel HEMTs was analyzed with respect to the channel, buffer, and AlN interlayer design, revealing that the alloy disorder and ionized impurity scattering mechanisms were predominant, limiting the mobility of 2DEG up to 180 cm2/Vs for a sheet charge density of 1.1 × 1013 cm−2. A surface roughness of <1 nm (2 μm × 2 μm atomic force microscopy scan) was achieved for the epitaxial structures demonstrating superior crystalline quality. The fabricated HEMT device showed state-of-the-art contact resistivity (ρc = 8.35 × 10^−6 Ω · cm2), low leakage current (<10^−6 A/mm), high ION/IOFF ratio (>10^5), a breakdown voltage of 2.55 kV, and a Baliga's figure of merit of 260 MW/cm2. This study demonstrates the optimization of the structural design of UWBG AlGaN channel HEMTs and its effect on transport properties to obtain state-of-the-art device performance.