Auger electron spectroscopy, x‐ray photoelectron spectroscopy, and ion sputtering techniques were used to analyze the oxide formed on the surfaces of 1000Å thick, e‐beam deposited Permalloy films. These films were oxidized under pressure and at temperatures between 160° and 250°C. Fe is found to preferentially oxidize to on the outermost surface with Ni enrichment uniformly distributed throughout the entire unoxidized portion of the alloy. Oxide growth follows a parabolic rate law, and the activation energy of oxidation is estimated to be ∼0.5 eV. Corrosion characteristics of Permalloy thin films are quite sensitive to the nature of the surface oxide layer. Proper postoxidation treatments have proven to be effective in increasing their atmospheric corrosion resistance. This is interpreted in terms of the formation of a hydrated layer with relatively small defect density.