To provide a semiconductor device which can be miniaturized or highly integrated. To obtain a semiconductor device including an oxide semiconductor, which has favorable electrical characteristics. To provide a highly reliable semiconductor device including an oxide semiconductor, by suppression of a change in its electrical characteristics. The semiconductor device includes an island-like oxide semiconductor layer over an insulating surface; an insulating layer surrounding a side surface of the oxide semiconductor layer; a source electrode layer and a drain electrode layer in contact with top surfaces of the oxide semiconductor layer and the insulating layer; a gate electrode layer overlapping with the oxide semiconductor layer; and a gate insulating layer between the oxide semiconductor layer and the gate electrode layer. The source electrode layer and the drain electrode layer are provided above the top surface of the oxide semiconductor layer. The top surface of the insulating layer is planarized.