Self-aligned two-step STI formation through dummy poly removal

An integrated circuit structure includes a semiconductor substrate including an active region. A first shallow trench isolation (STI) region adjoins a first side of the active region. A gate electrode of a MOS device is over the active region and the first STI region. A source/drain stressor region of the MOS device includes a portion in the semiconductor substrate and adjacent the gate electrode. A trench is formed in the semiconductor substrate and adjoining a second side of the active region. The trench has a bottom no lower than a bottom of the source/drain region. An inter-layer dielectric (ILD) extends from over the gate electrode to inside the trench, wherein a portion of the ILD in the trench forms a second STI region. The second STI region and the source/drain stressor region are separated from each other by, and adjoining, a portion of the semiconductor substrate.