A vertical Metal-Oxide-Semiconductor (MOS) transistor includes a substrate and a nano-wire over the substrate. The nano-wire comprises a semiconductor material. An oxide ring extends from an outer sidewall of the nano-wire into the nano-wire, with a center portion of the nano-wire encircled by the oxide ring. The vertical MOS transistor further includes a gate dielectric encircling a portion of the nano-wire, a gate electrode encircling the gate dielectric, a first source/drain region underlying the gate electrode, and a second source/drain region overlying the gate electrode. The second source/drain region extends into the center portion of the nano-wire. Localized oxidation produces a local swelling in the structure that generates a tensile or compressive strain in the nano-wire.