Imaging performance and issues of immersion lithography are discussed with the results of the recent feasibility studies. Immersion lithography has advantage in the numerical aperture of optics by a factor of refractive index n of the liquid filled into the space between the bottom lens and wafer. In case of 193nm exposure, water (n = 1.44) has been found as the best liquid. It is shown, by using imaging simulations, that ArF (193nm) immersion lithography (NA=1.05 to 1.23) has equivalent performance to F2 (157nm) dry (NA=0.85 to 0.93) lithography. Six fundamental issues in the ArF immersion lithography are investigated and studied. Results of the study indicate that there are no “show stoppers” that prevent going into the next phase of feasibility study.