Reactive ion etching (RIE) and ion beam etching (IBE) were used to etch the Bi3.15Nd0.85Ti3O12 (BNdT) ferroelectric layer and top electrode (TE), respectively, for ferroelectric random access memory (FeRAM) applications. The effect of dry etching on the ferroelectric properties of Pt/BNdT/Pt capacitors and the film etching mechanism were investigated. After TE etching, the remanent polarization (2Pr) of capacitors decreased through the charging effect, but was recovered by rapid thermal annealing (RTA). A distinct polarization suppression of the capacitors was observed after BNdT layer dry etching owing to the large amount of ions accumulated in the electrode/film interface and within the films. The property damage could be recovered after long-time furnace annealing. The capacitor property rejuvenation was complete even after 1010 switching cycles of fatigue test. The capacitor size effect and recovery of the ferroelectric properties after film etching process were also studied.