Near-surface damage created by Ar+ ion milling in InP and GaAs was characterized by capacitance-voltage, current-voltage, photoluminescence, ion channeling and transmission electron microscopy. We find no evidence of amorphous layer formation in either material even for Ar+ ion energies of 800eV. Low ion energies (200eV) create thin (≤100 Å) damaged regions which can be removed by annealing at 500°C. Higher ion energies (≤500 eV) create more thermally stable damaged layers which actually show higher backscattering yields after 500°C annealing. Heating to 800°C is required to restore the near-surface crystallinity, although a layer of extended defects forms in GaAs after such a treatment. No dislocations are observed in InP after this type of annealing. The electrical characteristics of both InP and GaAs after ion milling at ≥500 eV cannot be restored by annealing, and it is necessary to remove the damaged surface by wet chemical etching. For the same Ar+ ion energies the damaged layers are deeper for InP than for GaAs-after 500 eV ion milling at 45° incidence angle, removal of ∼485 Å and ∼650 Å from GaAs and InP respectively restores the initial current-voltage charaeteristics of simple Schottky diodes.