AlFe₂B₂ was prepared by two alternative synthetic routes, arc melting and synthesis from Ga flux. In the layered crystal structure, infinite chains of B atoms are connected by Fe atoms into two-dimensional [Fe₂B₂] slabs that alternate with layers of Al atoms. As expected from the theoretical analysis of electronic band structure, the compound exhibits itinerant ferromagnetism, with the ordering temperature of 307 K. The measurement of magnetocaloric effect (MCE) as a function of applied magnetic field reveals isothermal entropy changes of 4.1 J kg^–1 K^–1 at 2 T and 7.7 J kg^–1 K^–1 at 5 T. These are the largest values observed near room temperature for any metal boride and for any magnetic material of the vast 122 family of layered structures. Importantly, AlFe₂B₂ represents a rare case of a lightweight material prepared from earth-abundant, benign reactants which exhibits a substantial MCE while not containing any rare-earth elements.