This paper discusses the growth and evolution of residual stresses in (0002) preferentially oriented aluminum nitride (AlN) layers on Si (111) wafers by sputtering technique for the development of micro-electro-mechanical system (MEMS) accelerometer. The microstructure of the deposited films exhibited vertical columnar structures. Residual stresses in the sputtered AlN films are − 1.2 GPa, − 0.8 GPa, and − 0.25 GPa for the film thickness of 600 nm, 750 nm, and 900 nm respectively. The effect of the residual stress on the piezoelectric MEMS acceleration sensor structure is analyzed. The presence of residual stress reduced the resonant frequency (up to 14.72%) and bandwidth (up to 27.3%) of the accelerometer. The locations of the von-Mises stress maxima are shifted from the beam edges (adjoining to the proof-mass) to the whole proof-mass area. The normalized stress sensitivity (which defines the piezoelectric charge sensitivity) is reduced by two orders due to the residual stress in the AlN layers. © 2020, Springer Science+Business Media, LLC, part of Springer Nature.