A semiconductor device includes: a semiconductor substrate formed with an active region and an isolation region and having a trench formed in the isolation region; an isolation insulating film embedded in the trench of the semiconductor substrate; and semiconductor nanocrystals buried in the isolation insulating film. The coefficient of linear expansion of the semiconductor nanocrystal is closer to that of the semiconductor substrate rather than that of the isolation insulating film, so that stress applied to the active region after a thermal treatment or the like is reduced.