We have studied the dynamic avalanche phenomenon in an SOI lateral diode during reverse recovery by using a mixed-mode device simulation. In the study, it has been found that local impact ionization occurs near an anode-side field oxide edge, where a high-density hole current flows and a high electric field appears simultaneously. We propose that a p-type anode extension region (AER) along a trench side wall effectively sweeps out stored carriers beneath an anode p-diffusion layer during reverse recovery, resulting in reduction of the electric field and remarkable suppression of the dynamic avalanche. The AER reduces the total recovery charge and does not cause any increase in the total stored charge under a forward bias operation. This effect is verified experimentally by the fabricated device with AER. Thus, the developed SOI lateral diode is promising as a high-speed and highly rugged free-wheeling diode, which can be integrated into next-generation SOI microinverters.