We report on processing and characterization of lateral n-channel 4H-SiC MOSFETs. We find that growing the gate oxide in N2O ambient results in a significant enhancement of the electron inversion channel mobility. Depending on the processing , conditions the peak field effect mobility varies between 30 and 150 cm(2)/Vs in these normally off devices while transistors with a conventional wet or dry gate oxide exhibit mobilities below 10 cm(2)V/s. The mobility enhancement is correlated with a significant reduction of the density of shallow interface states with energies close to the SiC conduction band edge. This is revealed from capacitance-voltage (C-V) data and thermally stimulated current measurements (TSC) on n-type reference capacitors.