When used in a military context, the term area of operations, Commonly acronymized as "AO", refers to a physical space that has been delimited and defined for the purpose of maintaining good order during a military operation.  This term is usually used in relation to ground and naval units, and should not be confused with the semantically similar military operations area, which designates a very specific and rather esoteric portion of airspace.

The main purpose of defining an area of operations and assigning responsibility for it to a given commander is to invest a single responsible party with the power to set local operational timelines, direct the maneuver of troops, coordinate live-fire actions, and engage enemy targets. 

Creating this single point of coordination in a given locale is of primary importance to joint force commanders in order to maintain the upward flow of relevant information to decision makers, and to provide contact points for the lateral flow of information between the commanders of adjacent forces in order to mitigate friendly fire, or Blue on Blue incidents. 

When an AO is initially conceived, and subsequently reviewed, its size and shape will be considered within the context of the strength of the forces within it, and enemy activity within and around it.  An ideal AO provides the commander responsible for it with maneuver room and sufficient force strength to control and defend it from existing and projected internal and external threats.

While the term is properly only applied to sizable and rigidly defined spaces based on grid coordinates and precise mapping, in common military usage the term AO is regularly applied to much smaller, often informal areas, under the watch of single units, platoons, squads, or even of individual service members.

Further Reading: (PDF) TRADOC PAM 525-3-1

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