Nanosheet FET devices having substrate isolation layers are provided, as well as methods for fabricating nanosheet FET devices with substrate isolation layers. For example, a semiconductor device includes a nanosheet stack structure formed on a substrate, which includes a rare earth oxide (REO) layer formed on the substrate, and a semiconductor channel layer disposed adjacent to the REO layer. A metal gate structure is formed over the nanosheet stack structure, and a gate insulating spacer is disposed on sidewalls of the metal gate structure, wherein end portions of the semiconductor channel layer are exposed through the gate insulating spacer. Source/drain regions are formed in contact with the exposed end portions of the semiconductor channel layer. A portion of the metal gate structure is disposed between the semiconductor channel layer and the REO layer, wherein the REO layer isolates the metal gate structure from the substrate.