An embedded source/drain MOS transistor and a formation method thereof are provided. The embedded source/drain MOS transistor comprises: a semiconductor substrate; a gate structure on the semiconductor substrate; and a source/drain stack embedded in the semiconductor substrate at both sides of the gate structure with an upper surface of the source/drain stack being exposed, wherein the source/drain stack comprises a dielectric layer and a semiconductor layer above the dielectric layer. The present invention can cut off the path for the leakage current from the source region and the drain region to the semiconductor substrate, thereby reducing the leakage current from the source region and the drain region to the semiconductor substrate.