A method for fabricating a waveguide structure (i.e., preferably an optical waveguide structure) uses a two mask process step sequence for forming a waveguide layer over a substrate. A first mask within the two mask step process sequence is used to etch the substrate to provide a pillar within the substrate. A second mask within the two mask process step sequence is self aligned to, and covers a top and at least a portion of the sidewalls of, the pillar. The second mask is used as a thermal oxidation mask that provides an optical waveguide layer from a top portion of the pillar that is separated from a thinned substrate derived from the substrate by a waveguide isolation layer formed from thermal oxidation of at least a bottom portion of the pillar. Under conditions of manufacturing economy, and as a result of the processing sequence, the waveguide layer is formed with a non-planar bottom surface including a valley in the bottom surface of the waveguide layer and the substrate is formed with a non-planar top surface including a peak in the top surface of the substrate that corresponds with the valley in the bottom surface of the waveguide layer.