In a method of manufacturing a semiconductor device, a first fin structure for an n-channel fin field effect transistor (FinFET) is formed over a substrate. An isolation insulating layer is formed over the substrate such that an upper portion of the first fin structure protrudes from the isolation insulating layer. A gate structure is formed over a part of the upper portion of the first fin structure. A first source/drain (S/D) epitaxial layer is formed over the first fin structure not covered by the gate structure. A cap epitaxial layer is formed over the first S/D epitaxial layer. The first S/D epitaxial layer includes SiP, and the cap epitaxial layer includes SiC with a carbon concentration is in a range from 0.5 atomic % to 5 atomic %.