A device includes: a stack of nanostructures; a gate structure that wraps around the nanostructures; an isolation region between the stack of nanostructures and another stack of nanostructures adjacent thereto along a first direction; a source/drain region that abuts at least one of the nanostructures; and a spacer layer that is on sidewalls of the gate structure and on sidewalls of the source/drain region, the spacer layer covering an area between the source/drain region and a neighboring source/drain region of another transistor along the first direction.