A method of removing a damaged magnetic layer at the sidewall of MTJ edge is provided to form damage-free MRAM cell. In this method, the MTJ film stack outside the Ta hard mask protected area is first etched by high-power magnetic reactive ion etch (RIE) using methanol (CH3OH) or Co & NH3 as etchant gases. Then a very mild chemical vapor trimming (CVT) process is used to remove a damaged layer (by the high power RIE) from the MTJ sidewall followed by an in-situ edge passivation with Si nitride (SiN) layer formed by PECVD. The MRAM cell formed by such method will have higher magnetoresistance with good device performance and better reliability.