In a method of manufacturing a semiconductor device, a fin structure is formed over a substrate. The fin structure has a channel region and a source/drain region. A gate structure is formed over the channel region of the fin structure. A first source/drain etching is performed to recess the source/drain region of the fin structure. After the first source/drain etching, a second source/drain etching is performed to further recess the source/drain region of the fin structure. After the second source/drain etching, a third source/drain etching is performed to further recess the source/drain region of the fin structure, thereby forming a source/drain recess. One or more epitaxial layers are formed in the source/drain recess. The first source/drain etching is isotropic etching and the second source/drain etching is anisotropic etching.