According to one embodiment, a semiconductor substrate is provided having at least two transistor regions formed therein. Overlying the channel regions is a gate dielectric and transistor gate electrodes overly the gate dielectric and are positioned overlying the channel regions. Source and drain regions are formed on either side of the channel regions to create a transistor structure. In order to provide isolation between transistors in the semiconductor substrate, a trench is formed in the substrate. A strain-inducting layer is then deposited over the transistor structures and into the trench in the semiconductor substrate. A high-stress nitride layer is one type of material which is suitable for forming the strain-inducing layer.