A memory device, and a method of forming the same, includes a bottom electrode above an electrically conductive structure, the electrically conductive structure is embedded in an interconnect dielectric material. A magnetic tunnel junction stack located above the bottom electrode is formed by a magnetic reference layer above the bottom electrode, a tunnel barrier layer above the magnetic reference layer, and a laterally-recessed magnetic free layer above the tunnel barrier layer. Sidewall spacers surround the laterally-recessed magnetic free layer for confining an active region formed by the laterally-recessed magnetic free and the tunnel barrier layer.