  In this paper, we have proposed a \v{C}erenkov free-electron laser (CFEL)
with metallic side walls, which are used to confine an electromagnetic surface
mode supported by a thin dielectric slab placed on top of a conducting surface.
This leads to an enhancement in coupling between the optical mode and the
co-propagating electron beam, and consequently, performance of the CFEL is
improved. We set up coupled Maxwell-Lorentz equations for the system, in
analogy with an undulator based conventional FEL, and obtain formulas for the
small-signal gain and growth rate. It is shown that small signal gain and
growth rate in this configuration are larger compared to the configuration
without the side walls. In the nonlinear regime, we solve the coupled
Maxwell-Lorentz equations numerically and study the saturation behaviour of the
system. It is found that the \v{C}erenkov FEL with side walls saturates
quickly, and produces powerful coherent terahertz radiation.
