Numerical imaging simulations demonstrate the capability of immersion lithography to print features smaller than 45 nm (35 nm) with good depth of focus at a vacuum wavelength of 193 nm (157 nm). The optical impact of index variation of the immersion liquid is simulated and found to be a shift of focus of 1 nm for each 1 ppm change in the, bulk index of the liquid. For an index which varies through the thickness of the liquid (e.g., due to nonuniform temperature), the focus shift is found to be proportional to the total change in optical path length (OPL), with a 1 nm change in OPL leading to a similar to1.5 nm focus shift at 1.3 numerical aperture. A focus offset of 1-3 nm can be expected due to heating during scanning exposure. The possible formation of nanobubbles at resist surfaces is also discussed. While simulations show that even 10 nm thick bubbles at the surface of the resist cause 30% modulation in the aerial image intensity, no evidence of bubbles is seen in open frame immersion exposures. Imaging of 100 nm features is shown using an immersion contact phase-edge technique, with no evidence of bubbles or adverse liquid-resist interactions. Finally, we describe progress in the search for low absorbance liquids for use at 157 nm. Liquid purity, including dissolved O-2 and H2O, is found to be critical. The current absorbance record, 0.64 +/- 0.07 cm(-1), held by perfluorotriglyme (CF3[OCF2CF2](3)OCF3), is enough for a 350 mum working distance at 95% transmission. (C) 2003 American Vacuum Society.