Stress enhanced transistor devices and methods of fabricating the same are provided. In one embodiment, a transistor device comprises: a gate conductor disposed above a semiconductor substrate between a pair of dielectric spacers, wherein the semiconductor substrate comprises a channel region underneath the gate conductor and recessed regions on opposite sides of the channel region, wherein the recessed regions undercut the dielectric spacers to form undercut areas of the channel region; and epitaxial source and drain regions disposed in the recessed regions of the semiconductor substrate and extending laterally underneath the dielectric spacers into the undercut areas of the channel region.