The ultra-wide bandgap semiconductor β-Ga2O3 has facilitated the development of Schottky barrier diodes with high breakdown voltage and low power losses. Designing effective termination structures is a critical step in exploiting the advantages of β-Ga2O3 power diodes. Among various types of termination structures, mesa technique features a simple preparation process and theoretically high efficiency electric field management capability in β-Ga2O3 devices. In order to further reduce the peak electric field along the mesa sidewall and corner, the p-type NiO junction termination extension (JTE) structure was incorporated. However, deep level transient spectroscopy revealed a new shallow energy level at Ec–0.28 eV related to interface states inducing by dry etching, which is the cause of the weakened JTE structure effect and instability of electrical properties. A low-temperature post-annealing process was proposed to eliminate the interface states, thereby achieving better charge balance and enhancing the breakdown voltage of compounded termination device from 1.35 to 2.1 kV without sacrificing the forward characteristics. This work reveals the energy level related to interface states introduced by dry etching in β-Ga2O3 and facilitates the fabrication of high-performance devices.