The co-sintered phosphor of cerium-doped yttrium aluminum garnet (YAG:Ce) and aluminum nitride (AlN) is a promising material for next-generation light-emitting diode lighting applications. Despite AlN’s excellent thermal conductivity, its high sintering temperature and surface reactivity limit its industrial use in co-sintered phosphors, and effective methods to improve its sinterability without compromising properties remain underexplored. In this study, the sinterability of the AlN and YAG:Ce composite is improved by coating AlN particles with a soluble carbon material (SCM) prior to sintering. SCM coating leads to a 6.75% increase in photoluminescence (PL) intensity under 15 W laser excitation and a 6.85% improvement in thermal conductivity, which suppresses thermal quenching. The enhanced thermal conductivity also minimizes PL decay over time, thereby maintaining high luminosity for extended periods. Furthermore, the hardness and handling properties of the obtained sintered body are significantly improved, with hardness increasing by 112.3% when SCM-coated AlN is used. Notably, the SCM does not remain in the final product, as it is fully removed during sintering, leaving no impurities or adverse effect on the material’s properties. Given its ability to easily and uniformly coat ceramic particles, SCM coating holds promise for broader application in enhancing the sinterability and performance of various ceramic-based materials.