In　this　study,　TbDy-Fe　giant　magnetostrictive　thin　films　were　firstly　prepared　by　ion　beam　sputtering　deposition　(IBSD)　method　on　water-cooled　substrates,　and　then　the　films　were　annealed　at　different　temperatures　under　vacuum　condition.　An　Inductively　Coupled　Plasma　Spectrometry,　Scanning　Electron　Microscope　(SEM),　Scanning　Probe　Microscope　(SPM),　and　Transmission　Electron　Microscope　(TEM)　were　used　to　investigate　the　surface　morphology　and　microstructure　for　TbDy-Fe　GMFs.　Besides,　DWS　type　Ultra-precision　Displacement　Meter　was　used　for　measuring　magnetostriction　coefficient　of　the　films　by　cantilever　method.　The　results　showed　that　TbDy-Fe　GMFs　of　compact　amorphous　microstructure,　smooth　surface　morphology,　and　high　interfacial　adhesion　had　been　deposited　under　the　fixed　fabrication　procedure.　Moreover,　as　annealing　temperature　increased,　microstructure　of　the　films　had　been　changed　as　following　order:　amorphous　&rarr　amorphous　+　microcrystalline　&rarr　nano-polycrystalline　(crystallization　temperature　was　about　400°C　).　It　was　noted　that　magnetostriction　of　TbDy-Fe　GMFs　could　be　drastically　improved,　particularly　for　low　magnetic　field　magnetostriction　sensitivity　when　annealed　at　about　400°C　(the　value　of　λ　was　about　500ppm　at　200KA·m-1).　©　(2011)　Trans　Tech　Publications.