Local oxidation of silicon (LOCOS) is the most commonly used isolation technology in silicon integrated circuits. The inherently large field oxide encroachment associated with LOCOS severely limits scalability. Unfortunately, low encroachment isolation techniques often result in decreasing field oxide recess, which effectively reduces source-to-drain separation. Recessed polysilicon encapsulated local oxidation (recessed PELOX) is demonstrated to achieve both low encroachment and increased field oxide recess. These benefits are obtained without sacrificing process simplicity or defectivity as evidenced by excellent gate oxide and diode quality.