After formation of a gate stack, regions in which a source and a drain are to be formed are recessed through the top semiconductor layer and into an upper portion of a buried single crystalline rare earth oxide layer of a semiconductor-on-insulator (SOI) substrate so that a source trench and drain trench are formed. An embedded single crystalline semiconductor portion epitaxially aligned to the buried single crystalline rare earth oxide layer is formed in each of the source trench and the drain trench to form a recessed source and a recessed drain, respectively. Protrusion of the recessed source and recessed drain above the bottom surface of a gate dielectric can be minimized to reduce parasitic capacitive coupling with a gate electrode, while providing low source resistance and drain resistance through the increased thickness of the recessed source and recessed drain relative to the thickness of the top semiconductor layer.