Immersion lithography is rapidly approaching the manufacturing phase. A production-quality exposure tool system with NA = 1.07 (Nikon NSR-S609B) was constructed to target the start of immersion lithography for IC manufacturing in 2006. Its projection optics has very small wave-front aberration and lowest local flare levels. The overlay issue has been analyzed, and its cause was found to be evaporation cooling. With the tandem stage and local fill nozzle implemented in the S609B, we have successfully avoided the evaporation cooling so that the good wet-to-dry mix-and-match overlay data have been obtained. The major part of immersion specific defects is caused by dried water-droplets, i.e. water-marks. The local fill nozzle has eliminated this defectivity by avoiding airflow in the nozzle. In the future, water immersion with NA = 1.30 optics will be used for half-pitch 45 nm manufacturing