A method of fabricating a transistor with a recessed channel is provided. The method includes forming trenches for a recessed channel on a semiconductor substrate, depositing an isolation layer on the semiconductor substrate on which the trenches are formed, depositing a gate dielectric layer on the semiconductor substrate so that the gate dielectric layer can be extended to bottoms and sidewalls of the trenches, forming gates to fill the trenches, and forming source and drain regions in the semiconductor substrate adjacent to the gates.