A nitride underlayer structure includes a sputtered AlN buffer layer with open band-shaped holes, thus providing a stress release path before the nitride film is grown over the buffer layer. A light-emitting diode with such nitride underlayer structure has improved lattice quality of the nitride underlayer structure and the problem of surface cracks is resolved. A fabrication method of the nitride underlayer includes providing a substrate and forming a band-shaped material layer over the substrate; sputtering an AlN material layer over the band-shaped material layer and the substrate to form a flat film; scanning back and forth from the substrate end with a laser beam to decompose the band-shaped material layer to form a sputtered AlN buffer layer with flat surface and band-shaped holes inside; and forming an AlxIn1-x-yGayN layer (0≤x≤1, 0≤y≤1) over the sputtered AlN buffer layer.