A compound semiconductor device includes a compound semiconductor substrate; epitaxially grown layers formed over the compound semiconductor substrate and including a channel layer and a resistance lowering cap layer above the channel layer; source and drain electrodes in ohmic contact with the channel layer; recess formed by removing the cap layer between the source and drain electrodes; a first insulating film formed on an upper surface of the cap layer and having side edges at positions retracted from edges, or at same positions as the edges of the cap layer in a direction of departing from the recess; a second insulating film having gate electrode opening and formed covering a semiconductor surface in the recess and the first insulating film; and a gate electrode formed on the recess via the gate electrode opening.