It is an object to provide a semiconductor device with a novel structure in which stored data can be held even when power is not supplied and there is no limitation on the number of writings. A semiconductor device includes a second transistor and a capacitor provided over a first transistor. A source electrode of the second transistor which is in contact with a gate electrode of the first transistor is formed using a material having etching selectivity with respect to the gate electrode. By forming the source electrode of the second transistor using a material having etching selectivity with respect to the gate electrode of the first transistor, a margin in layout can be reduced, so that the degree of integration of the semiconductor device can be increased.