The present invention provides a method of fabricating semiconductor device comprising at least one field effect transistor (FET) having source and drain (S/D) metal silicide layers with intrinsic tensile or compressive stress. First, a metal layer containing a silicide metal M is formed over S/D regions of a FET, followed by a first annealing step to form S/D metal silicide layers that comprise a metal silicide of a first phase (MSi.sub.x). A silicon nitride layer is then formed over the FET, followed by a second annealing step. During the second annealing step, the metal silicide is converted from the first phase (MSi.sub.x) into a second phase (MSi.sub.y) with x